Lordstown enters into agreement to sell $400 million shares to hedge fund
By Arghyadeep on Jul 27, 2021 | 03:37 AM IST
Lordstown Motors Corp said hedge fund YA II PN Ltd has committed to buy the electric truck maker's shares worth up to $400 million over a period of three years.
Under the deal, YA will receive over 35 million shares, about 19.9% of the total shares, upon completion of the agreement. The hedge fund will purchase the shares at $7.48 per share, Lordstown said in an SEC filing on Monday.
The share purchase deal came at a crucial time after the company faces heightened regulatory investigation related to its SPAC merger and vehicle preorders.
"Existing shareholders are not taking $400 million worth of dilution. It's like a standby commitment on the part of YA to buy stock when Lordstown says it needs more money," Erik Gordon, professor at the University of Michigan's Ross School of Business, told Reuters.
"I was surprised," Gordon said. "It's more like the knight in shining armor than the vulture at the carcass." He thinks the agreement will create liquidity that could help the Ohio startup to attract funding from others.
Last month Lordstown warned it might not be able to continue its operation as it does not have enough money to stay in business over the next year. The company had since attempted to calm the investors by saying it was in talks with multiple parties to raise funds.
The founder and CEO Steve Burns and CFO Julio Rodriguez has resigned from the company after Hindenburg Research, a short-seller firm, reported a dispute over the electric pickup truck maker's statistics.
YA II PN is a hedge fund managed by Mountainside, New Jersey-based investment manager Yorkville Advisors Global LP and has about $9.8 million in assets.
Yorkville has investments in more than 700 companies in over 20 countries, according to its website, which includes sectors like healthcare, metals and mining, energy, technology, and cannabis.
Lordstown's shares were down more than 2.5% at $7.29, setting up a lower closing for the fourth straight session.
Picture Credit: Bloomberg