Lordstown Motors Raises Up to $400 Million
Lordstown Motors, a struggling electric pickup truck company, said on Monday it had reached a deal with an investment firm to raise $ 400 million over three years.
Investment firm Yorkville Advisors has agreed to buy up to $ 400 million in Lordstown shares, which would provide much-needed cash for a firm that said this summer it could close without raising more money.
The deal is potentially very lucrative for Yorkville as it will buy the shares for at least $ 7.48 a share, Friday’s closing price. If Lordstown’s stock goes up, the hedge fund should turn a profit.
Yorkville agreed he would not bet against Lordstown’s actions. Lordstown also agreed to give Yorkville 371,000 shares, which are worth almost $ 3 million based on the current share price, for accepting the deal.
Once hailed by former President Donald J. Trump as a savior of manufacturing jobs in Ohio, Lordstown has struggled to produce vehicles while spending hundreds of millions of dollars. The company is also under investigation by the Securities and Exchange Commission and the Department of Justice.
Lordstown, which acquired a former General Motors plant in Lordstown, Ohio, went public in October when it merged with DiamondPeak Holdings, a special purpose acquisition company run by a wealthy Wall Street real estate investor.
SPACs raise money by selling stocks before they have assets, and then shopping for a business. They provide the companies they are merging with a way to go public with less disclosure and scrutiny than is typical of an initial public offering.
The SEC is investigating whether the company and its founder Steve Burns, who resigned as chief executive in June, have exaggerated claims about commercial buyers’ interest in its electric truck, the Endurance. Federal prosecutors are also investigating the company’s pre-order requests and its merger with DiamondPeak.
The company, which has stepped up its public relations operations in recent weeks, is represented by lawyers from Sullivan & Cromwell, a major New York law firm, in the investigations. Mr. Burns hired two attorneys from Simpson Thacher & Bartlett, another large New York firm.
Yorkville, which specializes in investing in small businesses, is not without controversy. In 2012, the SEC accused the company of mispricing its assets to hide losses from investors. But in 2018, a federal judge dealt the SEC a heavy blow by dismissing most civil fraud complaints against Yorkville. Regulators and Yorkville ultimately agreed to dismiss the case.
Lordstown’s stock price fell from a high of nearly $ 31 in February and is now trading below the $ 10 price DiamondPeak sold shares when it went public. The stock was down 2.5% at the close of trading on Monday.
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