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Dustin Franz/Bloomberg via Getty Images

Lordstown Motors just announced an apparent rescue deal in a gambit that layers more financial engineering into the pre-revenue electric truck maker that last year merged with a SPAC.

Catch up quick: The company is now under federal investigation for misleading investors about its preorders, and in June it said it may not be able to begin vehicle production or continue as a going concern.

Driving the news: Yorkville Advisors on Monday committed to purchase up to $400 million in Lordstown stock over the next three years, from time to time, when Lordstown asks it to.

  • Yorkville appears to be an intermediary here, with designs on selling the shares to other investors (the release notes that the fund can sell them even before taking possession of them).

Why it matters: Lordstown isn’t working with an investment bank on a traditional or at-the-market equity offering. Given its financial distress and potential legal troubles, that’s not a good sign.

  • As RBC analyst Joseph Spak wrote in a research note Monday, it’s a “seeming indication that a traditional underwritten deal is not an option right now.”
  • Bloomberg Opinion’s Matt Levine adds that an investment bank could get “very sued” if it sold Lordstown shares to investors and Lordstown then got in trouble with regulators and couldn’t continue as a going concern.

Context: Usually when investment banks or brokers help distressed companies raise capital, they do it on a “best efforts” basis. That means if the bankers can’t raise the money from investors, they can shrug and say “I tried” — and walk away. They’re not on the hook for the funds.

  • “It takes a big stomach for risk to commit to buy that much stock from a company with a reputation for performance and candor like Lordstown’s,” Erik Gordon, a professor at the University of Michigan’s Ross School of Business, tells the Pittsburgh Post-Gazette.

The big picture: Given all this, the signaling isn’t great. And Lordstown’s shareholders seem to know it. The stock's Tuesday close ($6.95) was down 15% from Monday morning.

The bottom line: The funding will help, but Lordstown still needs more money. A lot more.

  • The best-case scenario is that the deal with Yorkville helps the EV maker attract more funding from other sources.
  • Spak estimates in his note that the company needs more than $2 billion over the next four years to stay solvent — and that's assuming lower delivery targets than the company's forecast.

Go deeper

Ben Geman, author of Generate
Jul 28, 2021 - Energy & Environment

The private climate finance surge

Illustration: Aïda Amer/Axios

There's so much private equity and infrastructure fund action in the climate tech space these days that it's hard to keep up.

Driving the news: Brookfield Asset Management on Tuesday closed $7 billion for its Global Transition Fund that aims to scale clean energy and help carbon-intensive industries cut emissions.

Tina Reed, author of Vitals
4 hours ago - Health

FDA panel endorses shot of J&J booster for adults

Photo: Wolfgang Kumm/picture alliance via Getty Images)

Members of the Food and Drug Administration's vaccine expert panel on Friday unanimously endorsed a booster shot for adult recipients of Johnson & Johnson's COVID-19 vaccine at least two months after the initial dose.

Why it matters: The advisory committee raised concerns about a dearth of data to support their decision but ultimately decided to support an additional shot for those over 18.

Capitol Police officer indicted for obstructing Jan. 6 investigation

Trump supporters clash with police and security forces as people try to storm the Capitol on Jan. 6. Photo: Brent Stirton/Getty Images

A U.S. Capitol Police officer has been indicted on obstruction of justice charges for allegedly helping hide evidence of a participant's involvement in the Jan. 6 riot.

Driving the news: Officer Michael A. Riley, 50, is accused of telling the unidentified participant, referred to as "Person 1," in the Jan. 6 riot to delete posts from Facebook, which showed them in the Capitol during the attack.