Low on Cash, Lordstown Motors (RIDE) Gets a Lifeline as it Secures up to $400M in Purchase Agreement with YA
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Lordstown Motors (NASDAQ: RIDE) announced on Monday that hedge fund Yorkville Advisors (YA) has agreed to purchase up to $400 million of the company’s shares. The purchase would happen over a three-year-period. 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.
"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, told Reuters.
Lordstown’s operations have been under increasing scrutiny in recent months after the company said it had no firm orders for its vehicles. The company’s CEO and CFO then resigned.
"I was surprised. It's more like the knight in shining armor than the vulture at the carcass." — Gordon
After opening higher on the news, shares of RIDE are down 1% in mid-day trading Monday after a steady fall over the past several months. Shares are down 63% year-to-date.
By Michael Elkins | Michael.Elkins@streetinsider.com
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