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)
By Eva Mathews and Ben Klayman