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Lordstown Motors ’ability to stay in business depends on raising capital, estimates, says CFO

Lordstown Motors ’ability to stay in business depends on raising capital, estimates, says CFO

Lordstown Motors corporations

his ability to stay in business for at least another year remains questionable until he gets more funding and his market value rises, his chief financial officer said after an electric truck maker sold his factory to raise money.

In June 2021, Lordstown, which plans to launch its first car this year and is yet to generate revenue, issued a continuity warning in June 2021, expressing concern about its financial health.

“It will be there until we raise enough capital and reach a higher market capitalization,” CFO Adam Krol said Monday, citing a warning about the current venture. A business is considered operational if management does not intend to liquidate it or cease operations.

Last week, the company said it had closed the deal sell his factory in Lordstown, Ohio, a branch of a contract collector

Foxconn Technology Group.

Lordstown received $ 230 million for the factory, formerly the production site of General Motors Coand was reimbursed approximately $ 27 million in operating and expansion costs by Foxconn of Taipei, which had previously acquired about $ 50 million in shares in Lordstown.

Lordstown, which went public in 2020 as a result of a merger with the special purpose acquisition company, is in the process of crashing tests of Endurance, its first car, and intends to launch commercial production in the third quarter.

Foxconn, officially known as Hon Hai Precision Industry Co., will build Endurance for Lordstown and has allocated $ 100 million for a new joint venture between the two companies. The commitment includes a $ 45 million loan to Lordstown.

“We are no longer ponies with one focus,” Mr Krol said, pointing to plans to develop more cars with Foxconn.

Lordstown needs to raise an additional $ 150 million in capital by the end of the year to fulfill its plans for 2022, which include building about 500 cars, Mr Krol said. The company aims to have at least $ 75-100 million in cash on balance at the end of this year, he said.

The company held cash and cash equivalents of $ 203.6 million at the end of the first quarter compared to $ 587 million a year earlier. Lordstown recorded a loss of $ 89.6 million for the quarter compared to a loss of $ 125.2 million for the same period a year earlier.

Mr Kroll said Lordstown could raise funds through public or private placement of institutional investors, adding that this could include selling debt or stocks. “There may be other things that could attract more strategic partners,” he said.

The guide is in full swing for the commercial launch of Endurance, Mr Krol said, adding that it will be an important milestone for the company. “Most of the fundraising is starting,” he said.

Lordstown may face challenges in raising the necessary funds amid the recent sell-off in the market, which has hit technology and other stocks hard. Shares of the company closed at $ 2.27 on Monday, down 7.4% for the day and 39% since the beginning of the year. Its market capitalization was $ 448.1 million.

“We are definitely at risk for EV startups,” Mr Krol said. “I can’t predict when and when that may change.”

Analysts remain skeptical about the company’s outlook, pointing to issues including fundraising and changing investor sentiment. “After all, we see a way forward [the company] it is becoming more and more difficult, ”said analyst Emanuel Rosner

Deutsche Bank,

wrote in a note to clients last week.

Last year, Lordstown opened an investigation Securities and Exchange Commission and Ministry of Justice related to the SPAC transaction and the submission of pre-orders on Endurance.

The company earlier this month said it did not have enough cash to run its business plan for the year. He said the situation raises serious concerns about his ability to continue as a business continuity.

“As we seek additional sources of funding, there can be no assurance that such funding will be available for use on favorable terms or at all,” Lordstown said in its quarterly report. The company also cited as risk factors higher material costs and uncertainty regarding regulatory approval.

Write Nina Trentman at Nina.Trentmann@wsj.com

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