Lordstown Motors Hit with Class Action Lawsuit
YOUNGSTOWN, Ohio – A class action lawsuit filed in U.S. District Court Thursday alleges electric-vehicle startup Lordstown Motors Corp. made “materially false and misleading statements” that convinced investors to purchase the company’s stock at “artificially inflated prices” after it announced a merger with DiamondPeak Holdings Corp. in August.
The action, filed in the U.S. District Court for the Northern District of Ohio, names the company, its CEO Steve Burns, President Rich Schmidt, and Chief Financial Officer Julio Rodriguez as defendants. Court papers name investor Matthew Rico as the plaintiff.
According to court papers, the defendants violated the Exchange Act when they failed to publicly disclose important information that was known to them that could impact the company’s share price.
The legal action comes on the heels of Hindenburg Research’s report issued last week that alleges Lordstown Motors’ boasts of preorders for its new electric pickup, the Endurance, were “largely fictitious.” The scathing report also questioned the company’s production schedules and whether it could produce its all-electric pickup truck, the Endurance, by September.
After the report was released, Lordstown Motors Corp. stock fell 16.5% in a single day.
While Burns announced during a call with analysts Wednesday that the U.S. Securities and Exchange Commission has started an inquiry into the company over these matters, the company failed to disclose the SEC action in its yearly or quarterly report, according to the lawsuit.
“We are aware of the short-seller’s report,” Burns told analysts Wednesday. “We’ve also received a request for information from the SEC and we are cooperating with that inquiry. In addition, the board of directors has formed a special committee to review these matters.”
Burns declined to comment further on the Hindenburg report until the committee completes its review.
Lordstown Motors stock plunged nearly 14% on Thursday, the day after the SEC disclosure.
According to court documents, the defendants “employed devices, schemes, and artifices to defraud” and made false statements of material fact. The defendants also “engaged in acts, practices, and a course of business which operated as a fraud and deceit upon those who purchased or otherwise acquired the company’s securities during the class period,” the lawsuit says.
A request for comment from Lordstown Motors was not returned as of this posting.
The Boston-based law firm of Block & Leviton filed the lawsuit Thursday and announced the action via a press release.
Three weeks ago, a class action lawsuit was filed against Cincinnati-based Workhorse Group, a manufacturer of an all-electric van that was a finalist for a lucrative contract with the U.S. Postal Service for its next generation delivery trucks. The USPS awarded the contract to Oshkosh Defense.
Workhorse owns a 10% stake in Lordstown Motors, which would have helped manufacture these vans. Burns is the former CEO of Workhorse and formed Lordstown Motors shortly after he left the company.
Copyright 2021 The Business Journal, Youngstown, Ohio.