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Sherrod Brown, other senators probing LMC investor

LORDSTOWN — Four Democratic U.S. senators have asked several creators of special-purpose acquisition companies, including the one that acquired Lordstown Motors Corp., for information the lawmakers say will help Congress and federal regulators protect investors and keep the marketplace transparent.

On the list of six is David T. Hamamoto, CEO and chairman of New York City-based DiamondPeak Holdings Corp., which in October 2020 merged with Lordstown Motors Corp. to put the electric-vehicle startup on the fast track to becoming a publicly traded company.

Special-purpose acquisition companies, or SPACs, are shell companies that raise money to buy a privately held company and take it public. They’ve gained prominence this year as a quick path — as much as three-quarters of the time — to becoming publicly traded versus the traditional process of an initial public offering.

The senators who made the request are Sherrord Brown, D-Ohio; Elizabeth Warren, D-Mass.; Tina Smith, D-Minn.; and Chris Van Hollen, D-Md., in the letter sent this week.

They raise concern over reports that insiders are taking advantage of legislative and regulatory gaps at the expense of ordinary investors.

“We seek information about your use of SPACs in order to understand what sort of Congressional or regulatory action may be necessary to better protect investors and market integrity and ensure a fair, orderly and efficient marketplace,” the letter states. “We are concerned about the misaligned incentives between SPACs’ creators and early investors on the one hand, and retail investors on the other.”

The letter poses eight questions and asks for the information to be provided by Oct. 8.

Some of what the senators want to know includes how investments were sought by the SPAC, transactional information and compensation — cash and noncash and whether the compensation was tied to the performance of the merged entity’s stock price.

In addition, the senators want to know if the SPAC merged with or acquired another entity its creator has a financial stake in or business arrangement with, and if there are lawsuits or regulatory actions regarding the SPAC, its target company, the merged entity or the creator that allege investors were misled, according to the letter.

A spokeswoman for Lordstown Motors declined to comment for the company or Hamamoto, an independent director for Lordstown Motors.

The U.S. Securities and Exchange Commission in two subpoenas has asked for documents related to LMC’s merger with DiamondPeak. Also, the company in a regulatory filing announced the U.S. Attorney’s Office for the Southern District of New York has opened a probe into the company.

The company has stated it is complying with both investigations.

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