Lordstown Motors Stock Hits 52-Week Low
LORDSTOWN, Ohio – Shares of Lordstown Motors plunged more than 9% during trading activity Tuesday, one day after the electric-vehicle automaker announced it had secured a $400 million equity deal with a hedge fund managed by Yorkville Advisors Global LP.
Shares of Lordstown Motors, which trades under the ticker symbol RIDE, closed at $6.59 per unit, down 9.6%. Over the last five days, the stock had lost 23% of its value and was down nearly 74% over the last six months.
On Monday, Lordstown Motors announced it had reached an equity purchase agreement with YA II PN, Ltd., a fund managed by New Jersey-based Yorkville Advisors.
Under the agreement, Lordstown Motors could sell up to 35.1 million shares of stock to Yorkville at the company’s discretion over three years, which could amount to $400 million.
According to Yorkville’s website, the firm has negotiated investments in more than 700 companies across 20 countries, and boasts more than $4 billion in transactions since it was established in 2001.
The firm specializes in arranging “alternative financing for global issuers with limited access to capital while building long-term partnerships with management teams,” the website states.
In 2012, the U.S. Securities and Exchange Commission charged Yorkville and its founder, Mark Angelo, with fraud, alleging the hedge fund exaggerated returns and overvalued its assets.
However, in 2018, a U.S. District Court judge in Manhattan found “no material fraud or negligence” on the part of Yorkville and the charges were dismissed.
The agreement with Lordstown Motors serves as a needed funding mechanism akin to a line of credit for the EV startup as it prepares to launch its first vehicle, the all-electric Endurance pickup, in late September.
After a bump Monday, shares of Lordstown Motors declined precipitously at the opening bell Tuesday, falling to a new 52-week low of $6.55 around 3:30 p.m.
Some of this could be attributed to an overall down day among EV companies and tech firms traded on Nasdaq amid worries of new strict regulatory measures in China. On Tuesday, the share price of Tesla fell by 1.9%; Workhorse Group, which is a 10% stakeholder in Lordstown Motors, dropped 3.4%; while Canoo was off by 3.1% during afternoon trading.
However, investors might also harbor jitters that the equity deal could dilute their stake in Lordstown Motors. Others likely have questions whether $400 million is enough to rescue the struggling startup. And, it appears the equity deal is structured so that Yorkville would resell any stock it acquires to retail investors.
On June 8, Lordstown Motors said in its restated 2020 annual report that it did not have the adequate capital to produce the Endurance and remain in business through mid-2022.
“The company believes its current level of cash and cash equivalents are not sufficient to fund commercial scale production and the launch of sale of such vehicles,” Lordstown Motors stated in its amended 10-K filing. “These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year.”
At the time, Lordstown Motors reported it had about $600 million in cash on hand and expects to end 2021 with about $200 million in liquidity.
Aside from equity financing, Lordstown Motors is also pursuing $200 million through the U.S. Department of Energy’s Advanced Technology Vehicle Manufacturing loan program.
To qualify for the program, a company must provide reasonable assurance that it is able to repay the loan.
Lordstown Motors expects to begin “limited production” of the Endurance at the end of September.
In May, Lordstown Motors said it would cut production for 2021 in half to about 1,100 vehicles. The company is targeting the fleet market, pricing the pickup between $52,500 and $55,000.
The company has also endured a messy management shakeup on recent weeks. On June 13, Lordstown Motors founder and CEO Steve Burns, as well as Chief Financial Officer Julio Rodriguez, resigned after an internal investigation found that some of the company’s executives had made inaccurate statements regarding preorders of the Endurance.
Angela Strand was appointed executive chairwoman of the company, while Becky Roof was named interim CFO.
In March, short-seller Hindenburg Research published a report alleging that the company’s claims of 100,000 preorders were mostly fabricated. It also raised questions whether Lordstown Motors had enough cash to bring the Endurance to commercial production.
Meanwhile, the U.S. Securities and Exchange Commission and the U.S. Department of Justice have launched investigations into preorders for the Endurance and its merger with blank check company DiamondPeak Holdings Corp.
DiamondPeak, a special purpose acquisition company, or SPAC, announced in August 2020 that it would merge with Lordstown Motors and take the company public that October. Lordstown Motors was listed on the Nasdaq under RIDE on Oct. 26.
Copyright 2021 The Business Journal, Youngstown, Ohio.