Lordstown Motors’ stock is up. Foxconn could buy its only factory.

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Electric vehicle start-up stock

Lordstown Engines

is on the rise because the company could sell its only manufacturing plant to raise the necessary cash flow.

Lordstown stock (ticker: RIDE) rose around 6% in pre-market.

S&P 500
and

Dow Jones Industrial Average
futures contracts both rose about 0.4%.

Bloomberg reported that

Hon Hai Precision Industry

(2317.Taiwan) – better known as iPhone assembler Foxconn – is interested in the factory. Neither company was immediately available for comment.

There are two reasons why this is a big problem.

First, the sale would make Lordstown money. The company said it needed to raise more capital to market its electric truck, the Endurance. Sales are expected to start soon.

The company raised approximately $ 600 million in a merger with a specialist acquisition company that closed in October 2020. By the end of the second quarter, the company’s cash balance had fallen to approximately $ 370 million. of dollars. It’s a big amount of money, but auto startups need a lot of money. Another EV startup,

Fisker

(FSR), had about $ 1 billion on its balance sheet at the end of the second quarter.

Second, Foxconn is an important partner. He wants to build cars. In fact, Foxconn is working with Fisker on an electric vehicle. Fisker will design and sell the vehicle, while Foxconn will assemble it. Foxconn sees the assembly of electric vehicles as a growth business for years to come.

By selling the factory, Lordstown could turn its business model into one similar to Fisker’s. Fisker plans to outsource its manufacturing, at least at the start of its business life, to

Magna International

(MGA) and Foxconn. Until now, Lordstown has been more like a traditional car maker because it has a large manufacturing plant.

If a sale occurs, Lordstown will have to pay for the assembly of the vehicle, but he will have more money and less expense. Foxconn, for his part, would have a car assembly facility that he could use to expand his new business.

The Ohio plant in which Lordstown operates was purchased from

General Motors

(GM) in mid-2019. The plant was shut down at the time of the sale.

Lordstown investors have struggled lately. Questions about cash and the proportion of pre-ordered vehicles that will actually be sold penalized the stock. The stock has fallen about 37% in the past six months. As Thursday’s trading approached, stocks were down 63% year-to-date.

Write to Al Root at [email protected]