The recent history of Lordstown Motors has been tumultuous. There was a vehicle fire prototype in January, changes of direction in June, and orders in recent years that weren’t as burdensome as we all thought; it is a company embroiled in controversy. News of approximately $ 400 million in funding would therefore certainly be welcome. If only it was that easy.
Quote-unquote investing is more or less a sale of shares. The buyer, YA II PN Ltd, is a hedge fund controlled by Yorkville Advisors, a Jersey City-based investment manager. Like Reuters and other outlets explain that it has pledged to buy 34 million shares of Lordstown if the deal is approved by shareholders. The sale would give the company the much-needed amount of cash, money it hopes will get it into serious truck production by September of this year.
This all comes after a string of bad news for the EV startup, which makes it strange that they were able to muster any kind of investment. Lordstown went public in summer 2020 but since then its stock price has fallen. We have mentioned the vehicle fire, the lack of controls and the associated controversy, but there have been other disturbing developments. The company said in May this year that it should reduce production to stay afloat, then he admitted in june that he needed more money just to survive. Before that, one of his prototypes had only traveled 40 miles in a 250 mile desert rally before literally running out of juice. This raises questions about the nature of this new investment.
Yorkville would be entitled to a hefty salary if the stock price exceeds its present value by $ 7.48 under the deal. In addition to buying the massive amount of shares, the company would also be awarded 371,000 shares just to close the sale worth nearly $ 3 million, according to the New York Times. In theory, if the stock has really bottomed, it could be a good deal for Yorkville if Lordstown finally gets the ball rolling.
Based across the Hudson from New York in Jersey City, Yorkville had previously been accused of fraud by the SEC in 2012; however, the case was subsequently dismissed in 2018. Nate Anderson, founder of short selling company Hindenburg Research, calls Yorkville a “toxic investor,” though, since he has everything to gain from Lordstown’s stock price falling further and further, what he says should be taken with a grain of salt, although Hindenburg was just before.
We have reached out to Lordstown Motors for comment on the deal, although we have not yet had a response at the time of publication.
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