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Lordstown Gives Up Gains; Seeks U.S. Loan to Fund Factory Plan

The Lordstown-Foxconn deal is reportedly valued at $230 million to $280 million. Morgan Stanley likes RIDE's new managers.
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Shares of electric vehicle maker Lordstown Motors RIDE gave up gains from the premarket. 

Foxconn said it agreed in principle to buy a Lordstown assembly plant for $230 million, confirming earlier reports of the plan.

On Friday, the companies said that they plan to pursue a U.S. Energy Department loan from a program to help pay for the cost of retooling the factory to build electric trucks.  

Lordstown shares at last check were down 13% at $6.96.

Lordstown Motors says it will move forward with a plan to build a limited number of vehicles for testing, validation and verification through the rest of the year and the first part of 2022. 

Morgan Stanley restarted coverage of the company with an equal-weight rating. Analyst Adam Jonas said the the fresh coverage was driven by the new management team in place.

"While risks remain, we believe RIDE’s EV/unit of technical capacity of $2.5-$3k may provide valuation support," Jonas said, according to Seeking Alpha.

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The company says its cash balance at Sept. 30 sat between $210 million and $240 million, compared with its previous outlook of between $225 million and $275 million.

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Lordstown purchased the plant from General Motors  (GM) - Get General Motors Company Report in late 2019. GM opened the plant in 1996. 

Lordstown came under investigation this summer. The Securities and Exchange Commission sought information regarding the merger between DiamondPeak and Legacy Lordstown as well as the reported vehicle preorders the company received.

The company eventually ousted Founder and Chief Executive Steve Burns over misstatements he made about the preorders for theEndurance.

Lordstown's merger with DiamondPeak was a SPAC transaction that led to a public listing for Lordstown.

The SEC inquiry followed short-seller Hindenburg Research's claims that Lordstown's reported preorders were inflated.