Lordstown Motors (NASDAQ: RIDE) stock price plunged to the lowest level on record as bets that the company could go bankrupt jumped. RIDE shares dropped to an all-time low of $0.2533, which was much lower than its all-time high of ~32.
Lordstown Motors and Foxconn crisis
Lordstown Motors is an upcoming electric vehicle company that aims to compete with the likes of Tesla and Rivian. The company, like Fisker, does the research and aims to use a third-party manufacturer.
Lordstown Motors has been going through an existential crisis. Earlier this month, the company published a going concern warning after Foxconn decided to pull out its investment in the firm. As part of the deal, Foxconn was supposed to invest $47 million in the company. In November last year, Foxconn invested $170 million in the company. In a statement, the company said:
“If the Subsequent Common Closing is further delayed or such fundings do not occur, the Company will be deprived of critical funding necessary for its operations. The Company is evaluating its legal and financial alternatives.”
All factors held constant, Lordstown Motors faces an uphill battle. The company has been a cash incinerator in the past few years as evidenced by its balance sheet. Its cash and short-term investments dropped from over $629 million in December 2020 to $176.7 million.
Financial results from other EV companies like Rivian and Lucid have shown the difficulties of building EV cars. For example, the two companies burned more than $6 billion and $3 billion in 2022. Tesla also burnt billions of dollars before it turned a profit a few years ago.
Further, Lordstown Motors’ survival depends on its relationship with Foxconn, one of the biggest contract manufacturers in the world. Now, it seems like the company wants out, which puts Lordstown Motors at risk.
Lordstown Motors stock price forecast
The daily chart shows that the RIDE share price has been in a strong bearish trend after peaking in 2021. It moved below the important support level at $0.8813, the lowest point on January 10th of this year.
The shares have moved below all moving averages while the MACD has moved below the neutral level. The Relative Strength Index (RSI) has moved below the overbought level.
Therefore, the Lordstown stock price will likely continue falling as sellers target the next key support at $0.002. In the long term, the shares will likely crash to zero.
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