Lordstown Motors taps into hedge fund money

Lordstown Motors, the electric truck startup that may or may not be a going concern for much longer, revealed on Monday that it had struck a deal with a hedge fund to buy up to $ 400 million in Lordstown shares over three years. The deal is to help Lordstown keep the lights on.

The deal with YA II PN Ltd – they name these things so you instantly forget they exist – was announced in a filing with the Securities and Exchange Commission. In the world of hedge funds, $ 400 million is both not nothing and not that much. I have to imagine Lordstown taking the money where he can get it these days.

Extract from the SEC file:

YA does not have the right to ask us to sell Class A common stock to YA, but YA is obligated to make purchases under our direction under certain conditions. There is no upper limit on the price per share that YA could be obligated to pay for the Class A common shares under the purchase agreement.

Actual sales of Class A common shares to YA from time to time will depend on various factors, including, but not limited to, market conditions, the price of our Class A common shares and our determinations as to appropriate sources of funding. for us and our operations. The net proceeds that we may receive under the Purchase Agreement cannot be determined at this time as it will depend on the frequency and prices at which we sell our Class A common shares to YA, our ability to meet the Terms of Purchase Agreement and other limitations, terms and conditions of the Purchase Agreement. The Company expects that any proceeds received by the Company from such sales to YA will be used for working capital and general corporate purposes.

In return, YA will get a small discount on the stock if she ever has to buy, or three percent, according to Bloomberg, and the deal is structured in such a way that Lordstown’s share price would have to rise significantly for Lordstown to have access to the full $ 400 million.

Restrictions on what percentage of shares the company can sell suggest the maximum it could raise at its current price – just north of $ 7 – is around $ 260 million. The shares would have to rise by almost $ 12 to get the full amount, [RBC Capital Markets LLC Analyst Joseph Spak] noted.

“The negatives are dilution, an apparent indication that a traditional guaranteed deal is not an option at this time,” wrote Spak, who believes the stock is underperforming and believes the company needs to. ‘about $ 2.25 billion through 2025. “While this deal helps, we believe it is not enough.

Lordstown shares fell about 1% to $ 7.41 at 2:54 p.m. in New York City and are down about 63% this year.

According to Reuters, YA II PN Ltd is managed by Yorkville Advisors, which said on his site that he “[makes] innovative structured investments in debt and equity, offering a range of personalized financing instruments ”, which is a complicated way of saying if you need to take money out of them you’re probably not that hot . You won’t be surprised to learn that Nikola, another not-so-hot electric truck startup made a similar deal last month with another company. Normal businesses do normal things.