Lordstown Motors (NASDAQ:RIDE) stock was up nearly 20% this morning after the electric vehicle manufacturer announced that it has closed a deal to sell its Ohio facility to Foxconn.
The deal provides Lordstown Motors with more than $200 million in cash at a time when it has been struggling to secure the necessary capital to produce its Endurance electric pick-up truck.
Before today, RIDE stock had declined 59% year to date.
What Happened With RIDE Stock
In a statement, Lordstown Motors said it has finalized the sale of several assets to Foxconn, including its Ohio facility, for $230 million. Under terms of the deal, Lordstown will keep some assets tied to the Ohio plant, such as the hub motor assembly and battery pack manufacturing lines.
In total, Lordstown said it will receive $260 million of proceeds from the asset sales to Foxconn. The two companies have also agreed to a joint venture to make vehicles together, with Lordstown owning a 45% stake and Foxconn owning a majority 55% position.
Why It Matters
The cash from Foxconn will enable Lordstown Motors to move forward with production of its long-delayed Endurance pick-up truck. However, despite earning as much as $260 million in cash from the Foxconn deal, Lordstown said it still needs to raise an additional $150 million to put its Endurance electric pick-up truck into full production.
What’s Next for Lordstown Motors
The sale of Lordstown Motors’ Ohio manufacturing facility gets the electric vehicle startup out of a tricky situation. The sale gives Lordstown some much-needed capital and will enable the company to progress toward its goal of manufacturing its electric pick-up truck.
While gaining $260 million in cash is positive, investors should keep in mind that Lordstown Motors still has a long way to go to get to full production, and RIDE stock has a long road to recovery ahead of it.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.