Lordstown Motors, the electric vehicle startup near Youngstown, Ohio, has struck a deal to sell up to $400 million of its common shares to a New Jersey-based hedge fund.
Lordstown Motors has signed an equity purchase agreement with YA II PN Ltd., managed by Yorkville Advisors Global LP in Mountainside, New Jersey, according to a Monday filing with the Securities and Exchange Commission (SEC).
The share sales "may occur from time to time at our sole discretion over the approximately 36-month period" following the start of the agreement on Friday, Lordstown Motors said in its filing.
"There is no upper limit on the price per share that YA could be obligated to pay," and YA may buy up to about 35 million shares of the electric vehicle developer, with shareholder approval, according to the agreement.
But Lordstown Motors is not allowed to direct YA and its affiliates to buy more than 4.99% of its outstanding shares, according to Nasdaq rules, the agreement states.
The purchase agreement comes at a critical time for Lordstown Motors, which has been preparing for a late September launch of its first vehicle, the Endurance electric truck for the commercial fleet market.
While Lordstown Motors says uses for cash generated by the stock sales "cannot be determined at this time," the cash could help the company begin producing and selling Endurance, as planned.
On June 9, Lordstown Motors stunned investors by saying it had too little cash to begin production and may not survive a production stall.
Since then, the company has replaced its chief executive and chief financial officers and hired additional leaders to lead the company through its production start.
The company is being investigated by the Justice Department and Securities and Exchange Commission for the way it went public in October and how it has counted "binding orders" for its vehicles.
Shares of Lordstown Motors (Nasdaq: RIDE) were down more than 1% to $7.39 in late-afternoon trading Monday.
