Embattled EV startup Lordstown Motors (RIDE) said it had secured a deal in which hedge fund YA II would buy up to $400 million in equity. RIDE stock rose.
The transactions will occur from time to time at Lordstown’s direction with no upper price limit, according to an SEC filing on July 26. The fund has agreed to not engage in any short sales or hedging transactions. Lordstown plans to use the proceeds as working capital and general corporate expenses.
The deal comes after Lordstown warned investors on June 8 that it didn’t have enough cash on hand to start commercial production and sales of its full-size electric pickup truck, the Endurance. It signaled it might go out of business if it didn’t secure more funding.
However, a week later, the company changed course and said it had enough money to begin production and expected to build between 15,000 and 20,000 trucks through May of 2022.
Lordstown went public through a special purpose acquisition company, or SPAC, in October 2020.
In May, short seller Hindenburg Research claimed Lordstown misled investors with false order numbers, among other things, to raise capital for its Endurance electric pickup. The Hindenburg report also said the pickup was years away from production. But Lordstown says it’s on track to start making the vehicle in September.
On July 15, Lordstown confirmed the Justice Department is investigating its business, including the SPAC deal that brought the company public and its reporting of vehicle preorders.
Shares rose as high as 8.04 following news of the deal, but reversed lower to trade down 2.5% to 7.29 on the stock market today, following news of the deal. RIDE stock has tumbled 77% from its all-time high of 31.80 achieved intraday on Sept. 22, 2020, according to MarketSmith chart analysis.
Workhorse Group (WKHS), which has a 10% stake in Lordstown, climbed 5.65%. Among other EV startups, Canoo (GOEV) rose 1.8% and Fisker (FSR) was up 2.4%. Lucid Motors (LICD), which began trading today on the Nasdaq, surged 10.6%.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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