Lordstown Motors says hedge fund may buy up to $400 mln of its stock (updated)

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26/07/2021 18:14

(Adds comment by business school professor, updates stock
price)
    By Eva  Mathews and Ben Klayman
    July 26 (Reuters) - Lordstown Motors Corp  RIDE.O  said on
Monday hedge fund YA II PN Ltd has committed to purchase up to
$400 million of the company's shares over a three-year period,
coming at a crucial time when the electric-truck maker faces
heightened regulatory scrutiny related to its SPAC merger and
vehicle preorders.
    Under the deal, YA can receive nearly 35 million Lordstown
shares upon execution of the agreement, subject to the approval
of Lordstown shareholders, as well as a small discount on the
shares whenever purchased, according to a regulatory filing https://www.sec.gov/ix?doc=/Archives/edgar/data/0001759546/000155837021009220/ride-20210723x8k.htm.
    Some industry observers called it a good deal for Lordstown.
    "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," said Erik
Gordon, professor at the University of Michigan's Ross School of
Business.
    "I was surprised," Gordon said. "It's more like the knight
in shining armor than the vulture at the carcass." He added that
 Monday's commitment creates a cushion of liquidity that could
help the Ohio startup attract funding from others.
    The agreement comes a month after Lordstown warned it may
not be able to continue as a "going concern." The company had
since attempted to allay fears by saying it was in talks with
multiple parties to raise funds.
    The investor, YA II PN Ltd, is a fund managed by
Mountainside, New Jersey-based investment manager Yorkville
Advisors Global LP.
    Yorkville has investments in more than 700 companies in over
20 countries, according to its website. Its current active
sectors include healthcare, metals and mining, energy,
technology and cannabis. Some of its investments include
cannabis deals network Leafbuyer.com, copper ores company
Copperstone Resources and biotechnology company CytoTools.
    Yorkville Advisors Global did not immediately respond to a
Reuters' request for comment.    
    Lordstown's shares were down 1% at $7.41 on Monday
afternoon, possibly setting up the company for a lower close for
the fourth straight session.

 (Reporting by Eva Mathews and Ankit Ajmera in Bengaluru and Ben
Klayman in Detroit; Editing by Chandra Eluri and Matthew Lewis)
 ((Eva.Mathews@thomsonreuters.com;))