EV startup Lordstown Motors has announced that hedge fund YA II PN Ltd will purchase $400 million worth of company shares over three years. General Motors currently owns 7.5 million shares of Class A common stock in the company.
Per a recent report from Reuters, the agreement includes nearly 35 million Lordstown Motors shares for YA II PN Ltd, pending approval from existing Lordstown shareholders. The announcement of the deal was made amid a regulatory probe into claimed vehicle preorders and the company’s SPAC merger.
Per the Reuters report, the announcement has been hailed as a blessing for Lordstown Motors, providing the startup with much-needed liquidity and potentially drawing the attention of further investors. Erik Gordon, professor at the University of Michigan’s Ross School of Business, characterizes YA II PN Ltd as more like a “knight in shining armor,” rather than a “vulture at the carcass.”
Lordstown Motors purchased the GM Lordstown Assembly assembly facility from General Motors in 2019. GM also invested $75 million into the startup, with $50 million in plant assets and permits, as well as $25 million in cash. GM previously outlined plans to integrate Lordstown Motors into its Tier 1 Supply chain network, while also providing access to various GM components.
However, the EV startup has faced numerous roadblocks and difficulties in getting off the ground. Most recently, Lordstown Motors CEO Steve Burns and CFO Julio Rodriguez both announced their resignation in June. The executives’ resignations followed the opening of an investigation from the Securities and Exchange Commission examining the company’s merger with Special Acquisition Company Diamond Peak Holdings. Lordstown Motors was also lambasted in a report from Hindenburg Research that claims the startup lied about receiving some 100,000 non-binding pre-orders for its upcoming all-electric Endurance pickup truck.
Earlier in June, Lordstown Motors announced that it was seeking additional capital to build its new Endurance pickup truck, which is said to be targeting budget-minded EV fleets. The company has since built beta test prototypes of the vehicle.
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Comments
Before calling that good news, we need to know the exact terms? Will this hedge fund buy the shares well under street value, then immediately sell them take a profit and hurt Lordstown stock price worse than it already is? Lordstown Motors is a palace of pain for investors already!
I’m not sure how you could come up with that unless you just didn’t read the article at all.
“YA II PN Ltd will purchase $400 million worth of company shares over three years.”
Ya, I read the press release, and it does not give the specific terms. In private transactions these shares are sold often below the public price, in this case how much lower is the question, and how much does this dilute shareholders?
You’re worried about shareholder value over a three year period?
If I had shares, I’d be more worried about whether they survive the next three months.
Maybe this will make the difference.
No, I think the bigger concern is if this hedge fund buys these discounted shares and dumps them right back into the market for a profit, but at the expense of Lordstown’s existing shareholders. As for Survival, Lordstown motors is not likely to make it to next summer. This $400 million is not even enough to keep the lights on that long.
Again, it makes no sense to worry about the shareholders losing money on this, if the greater concern is that the company won’t be around much longer anyway.
Right it sound like a waste of money instead of good news for a Struggling Start Up Company
Someone needed a tax write off on a loss.
Its cheaper to pay taxes than lose money…
Yup money pit for tax purposes….
Give me 400 mil dollars. I’ll start a electric car company
obviously people are missing the point. The share may be sold at 3% discount. This is well defined. There are other stipulations etc attached to the shares. The share will only be sold WHEN LMC want to raise funds. Right now they have enough to get to market.
With sales of 1,000 units they will receive $55M. They are good to go to May of 2022. By then, they will be both in full production and sales. The extra funds will allow them to scale up sooner rather than later. As the sales of units increases, they cover their cost and have a small profit. Simple Cost Accounting 101 for those who studied accounting. So this is a lifeline similar to a line of credit. It may be used only IF Lordstown want to use it at any point in the next 3 years,
Last I checked Lordstown’s prototype burst into flames almost instantly… Do they have working prototypes? Would anyone want to by a production model of a vehicle that bursts into flames even more often than other BEVs.
Lordstown is dead. RIP. Part of me wished that the government would regulate SPACs, but if fools want to gamble their money whatever.
Other EV have also burst into flames. Look at the Bolt right now even with the software update.
Human error on assembly of battery was identified. Now automated process. Batterly line is now functional. Hub motor line received and in process of instalation. Check out Lordstown week to learn more. 57 Beta model produced. Initial head on and side crash testing complete with flying colors. No issues.
Above comment obviosly does not like a SPAC which appears to cloud the issue and perspective. Sad American does not back an Amercan made company that wants to provide jobs in 🇺🇸.
This plant should be making the Blazer.
gM was bailed out by the American taxpayers “to keep good jobs in America” .
Then they gave the blazer to Mexico and closed this lordstown plant because they “didn’t have a product”
Screw you mary Barry and gM.