LMC taps $400M funding source
LORDSTOWN — Lordstown Motors Corp. has secured a deal with a hedge fund to pump $400 million into the struggling electric-truck startup that last month expressed doubt it could meet its financial obligations.
The equity purchase agreement with YA II ON, Ltd. calls for the fund to purchase up to 35,144,690 shares of Lordstown Motors’ Class A common stock over three years, according to a regulatory filing.
YA, managed by New Jersey-based Yorkville Global Advisors LP, has agreed not to engage in any short sales or hedging transactions on Lordstown stock, which it agreed to purchase for at least $7.48 per share.
The more than 35 million Lordstown Motors shares represent a 19.9 percent equity stake in the company, which has come under federal regulatory and law enforcement scrutiny as of late, but still expects to start limited production of its battery-powered pickup truck, the Endurance, in September.
At the close of the transaction, Lordstown Motors agreed to issue 371,287 shares of its common stock to YA.
Shares of Lordstown Motors stock, traded under the RIDE ticker on Nasdaq, shot up nearly 9 percent in trading when the deal became public Monday morning. The price closed at $7.29 per share, down 2.5 percent from the opening bell.
The company has come under increased federal regulatory and law enforcement scrutiny over the number of orders it claimed it had for the Endurance.
It confirmed last week in a filing with the U.S. Securities and Exchange commission that the U.S. attorney’s office in Manhattan has opened a probe. The SEC also is investigating the company and has issued two subpoenas related to its merger in October with special purpose acquisition company, DiamondPeak Holdings.
Lordstown Motors said it is cooperating with both investigations.
The cash infusion comes after the company in June issued a notice of “going concern,” an accounting term that means a company has the financial wherewithal to meet its obligations. At the same time, it stated in a regulatory report it did not have enough money to launch scale production of the truck
The company is also defending itself against multiple lawsuits that were the result of a scathing short-sellers report in March that alleged the company misled its investors regarding preorders and production schedule.
A special committee of company officials was formed to investigate the claims made in the report. The committee responded in June, reporting it found the claims in the report mostly false and misleading, but substantiated issues regarding some inaccurate statements about preorders for the company’s electric truck.
The same day the report was released, Lordstown Motors announced founder and CEO, Steve Burns, and its chief financial officer, resigned. No reason was given for their departures.
According to Yorkville’s website, it has investments in more than 700 companies in more than 20 countries.