YOUNGSTOWN, Ohio – The officers and directors of Lordstown Motors Corp. and its predecessor, DiamonPeak Holdings Corp., broke federal securities law and cost the electric vehicle company at least $ 1 billion, according to new complaints filed in federal court late last month .
According to documents, two more derivative class actions, one in Youngstown U.S. District Court and the other in Delaware U.S. District Court, were filed two weeks after a management reshuffle at Lordstown Motors.
Investor Claude Patterson filed a lawsuit on June 25 in Delaware, as the company wrapped up Lordstown Motors Week, a five-day event in late June that opened the doors of the company to investors, analysts and the media. Shareholder An Thai followed with a similar lawsuit filed in Youngstown on June 30.
Lordstown Motors announced on June 14 that its founder and CEO, Steve Burns, had resigned. CFO Julio Rodriguez has also resigned.
Both lawsuits name Burns and Rodriguez as defendants.
The company has appointed Angela Strand as the new executive chairman to replace Burns until a new CEO can be found. Becky Roof has been appointed interim CFO and Jane Ritson-Parsons has been appointed COO, the company announced on June 14.
According to the complaints, the plaintiffs are suing the executives and former executives of Lordstown Motors and its predecessor, DiamondPeak Holdings Corp., on behalf of the company. Both name Lordstown Motors as the “nominative” defendant.
The complaints allege that the actions of these defendants cost Lordstown Motors at least $ 1 billion in value and exposed it to legal costs totaling millions of dollars.
“The defendants’ actions have caused substantial financial damage and damage to the reputation of Lordstown Motors,” the Delaware complaint alleges. Delaware lawsuit names Burns, Rodriguez, President Rich Schmidt and 13 other defendants. Youngstown’s complaint names Burns, Schmidt, Rodriguez and 16 others.
The new complaints allege the defendants breached their fiduciary duties and defrauded the company, while some defendants engaged in insider trading and cashed in shares when the company’s stock price was high, documents show judicial.
Lordstown Motors announced on June 14 that an internal investigation revealed that company executives had made inaccurate public statements regarding Endurance pre-orders. In March, short seller Hindenburg Research released a scathing report alleging that executives had misled investors and that the electric pickup’s pre-orders were largely “fictitious.”
At one point, then CEO Burns boasted that the company had over 100,000 pre-orders for Endurance.
Yet even after the findings, the new complaints indicate that the company continued to publish misleading statements, citing Schmidt’s comments at a June 15 roundtable hosted by the Automotive Press Association.
During that event, Schmidt told reporters that the company had “essentially binding orders” for Endurance that would carry production through May 2022. Two days later, the company released a statement revisiting those comments , acknowledging that there were no “binding” orders. for the truck.
The company’s shares have since plunged amid other developments such as a Securities and Exchange Commission investigation, the report of a preliminary investigation by the US Department of Justice and a revised financial report released in June that indicated that the company might not have enough funds to survive until next year.
DiamondPeak, a Special Purpose Acquisition Company, or SPAC, has announced that it will acquire Lordstown Motors in August 2020 with the goal of going public. On October 26, the merger became official and Lordstown Motors was listed on the Nasdaq stock exchange under the symbol RIDE.
Both lawsuits allege the defendants misled investors by making false statements, or allowing false statements to be made, regarding pre-orders of Endurance – the electric pickup under development in the world. ‘factory of the company. The complaints also allege that some of these defendants failed to put in place adequate internal controls which resulted in financial losses for the company.
In total, Lordstown Motors or some of its past and present executives are defending 10 class actions filed in federal court, one civil corporate espionage case pending in U.S. District Court in California, and another litigation in United States Court. common plaids from County of Trumbull.
Lordstown Motors’ stock value has plunged 56% since the start of this year. The company’s shares on Friday closed at $ 8.94, down 13.5% in the past five trading days.
Meanwhile, sources familiar with the company’s operations say Lordstown Motors has started laying off employees. The source, who declined to be identified, said several employees lost their jobs in the days following the June 13 resignations of Burns and Rodriguez.
According to the source, “dozens of engineers and supervisors” were made redundant as new management took charge of the company.
Others were laid off in the days following Lordstown Motors Week, which was held June 21-25, according to the source.
âIt’s a shame they have a good product and a good idea,â the source said.
However, another source said only “a handful of people” who had ties to Burns and Rodriguez were fired after the reshuffle. There have been no further layoffs to their knowledge, the source noted.
Lordstown Motors acquired the former General Motors plant here in November 2019 and pledged to relaunch the closed plant, which until March of the same year was producing the Chevrolet Cruze.
Over 1,500 people were working in Lordstown when it closed. Burns, founder and former CEO of Lordstown Motors, said last October that his company could employ as many as 800 once production begins on Endurance.
A spokesperson for the company could not be reached for comment on Friday.
Lordstown Motors employed 600 people between its Lordstown plant, an engineering operation in Michigan, and a tech hub in California, according to statements made last month by company chairman Schmidt.
Pictured: A beta model of Lordstown Motors’ electric truck, the Endurance.
Copyright 2021 The Business Journal, Youngstown, Ohio.