Lordstown Motors Corp (NASDAQ: RIDE) stock is trading lower Friday since it got delisting notice from Nasdaq after it filed for bankruptcy protection.
Lordstown Motors filed for Chapter 11 bankruptcy after its rescue deal with Hon Hai Precision Industry Co Ltd (OTC: HNHPF) Foxconn failed.
The deal involved Foxconn injecting cash and taking over production for Lordstown Motors.
As part of the deal, Foxconn was supposed to buy a tenth of Lordstown's equity at $1.76 per share.
Lordstown executed a reverse 1-for-15 stock split to avoid delisting from Nasdaq.
Foxconn claimed that the reverse stock split entitled them to purchase 62.7% of Lordstown's common stock, Financial Times reports.
Lordstown argues that Foxconn should still pay the agreed-upon price for a tenth of the adjusted share count.
Foxconn noted that the contract did not include a split adjustment for the common stock purchase.
Lordstown's shares were trading at around $3.70 after the reverse split, making the purchase unappealing for Foxconn.
Lordstown argues in its lawsuit against Foxconn that the investment agreement and filings with Cfius imply a split adjustment due to the expectation of Foxconn owning less than 20% of Lordstown.
Lordstown mentions the possibility of effectuating a 30:1 stock dividend, which would require Foxconn to pay $47.3 million for a fraction of the company's capital stock.
In the bankruptcy case, Lordstown intends to sell its remaining assets and IP, with Foxconn being a potential buyer.
Speculations are rife that both parties may find a resolution that involves adjusting the terms of the dispute.
Price Action: RIDE shares traded lower by 4% at $2.16 premarket on the last check Friday.