Lordstown Motors Collaborates with Foxconn; Shares Soar 21.2%

Lordstown Motors Corp. (RIDE) and Hon Hai Technology Group (Foxconn), one of the largest electronics manufacturers in the world, have entered into a definitive Asset Purchase Agreement related to LMC’s facility in Lordstown, Ohio.

Don't Miss Our Christmas Offers:

Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

Following the announcement, shares of the electric light-duty trucks provider that is focused on the commercial fleet market jumped 20.5% in the extended trading session on Wednesday.

Deal Details

In September, Lordstown Motors inked an Agreement in Principle (AIP) with Foxconn to jointly work on Lordstown Motors’ electric vehicle programs in the production and assembly plant in Lordstown, Ohio. Following the deal, Foxconn purchased $50 million of common stock from Lordstown Motors at an average price of $6.90 per share. The recent definitive Asset Purchase Agreement (APA) also implemented the terms of the AIP.

As per the terms of the recent deal, LMC will sell the Lordstown facility, excluding certain assets, to Foxconn for $230 million. Notably, a down payment of $100 million will be made by Foxconn in November, and subsequent down payments of $50 million on each of February 1, 2022, and no later than April 15, 2022. The balance amount will be paid at the closure of the deal.

After the closure of the deal, which awaits certain approvals, Foxconn will receive 1.7 million warrants to buy Lordstown common stock. These warrants have the option to be exercised over a period of three years at a price of $10.50 per share.

Further, under the joint venture agreement, Lordstown Motors and Foxconn will co-design and develop vehicle programs for the global commercial fleet market, using the MIH open platform. The companies will have the rights to commercialize these new EV programs in North America and globally. (See Lordstown Motors stock charts on TipRanks)

Through this partnership, Lordstown Motors will be benefitted in terms of vehicle production costs and supply chain risks, along with Foxconn’s expertise in hardware-software integration.

CEO Comments

Following the deal, the CEO of Lordstown Motors, Daniel Ninivaggi, said, “In my view, this transaction provides LMC a better opportunity to fulfill its original mission of satisfying the growing demand for electric vehicles, particularly in the underserved commercial market, with a more flexible business model.”

Analysts Recommendation

Recently, Deutsche Bank analyst Emmanuel Rosner maintained a Hold rating and a price target of $7 (25.9% upside potential) on the stock.

Rosner expects the company to post a loss per share of $0.61 for the fourth quarter of 2021.

The rest of the Street is bearish on the stock with a Moderate Sell consensus rating based on 1 Buy, 3 Holds and 3 Sells. The average Lordstown Motors price target of $6.67 implies 20% upside potential to current levels. Shares have decreased around 68% over the past year.

Risk Analysis

According to the new TipRanks’ Risk Factors tool, the Lordstown Motors stock is at risk mainly from two factors: Finance and Corporate, and Production, which contribute 43% and 20%, respectively, to the total 60 risks identified for the stock.