Focxonn is arguing that it's still entitled to buy the same number of Lordstown shares, at the same price following 15-to-1 stock split, which would give it more than 60% of the American startup car auto cars
To keep itself listed, Lordstown performed a reverse stock split, which effectively combines shares – in this case every 15 shares were turned into one – inflating their value, and keeping the company on the Nasdaq exchange.The plan may have kept Foxconn on the hook for the $47.3 million it had agreed to pay Lordstown for 10 percent of the company, but it may now regret that.
Foxconn believes that it should still be allowed to buy 26.9 million shares, even though they are now proportionally more than was agreed to, for the same $1.76 each, effectively giving it two thirds of the company for $47.3 million. In its suit, Lordstown does not point to a clause saying that the figures must be adjusted following a stock split, but it does point out that the agreement was for less than 20 percent of the company.
It also points out that if Foxconn’s position is found to be the correct one, then it could have simply split its stock and forced its investor to pay hundreds of times more than each individual share was worth for a tiny proportion of the company. It calls this “an absurd interpretation of the Investment Agreement.”
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