Lordstown Motors Proposes Settlement Plan with Shareholders
LORDSTOWN, Ohio – Lordstown Motors Corp. has proposed a second modified plan before a U.S. Bankruptcy Court in Delaware that is intended to resolve class-action litigation first filed against the company nearly three years ago.
The bankrupt electric vehicle manufacturer disclosed the plan in a filing with the U.S. Securities and Exchange Commission on Thursday.
According to the filing, the modification plan includes a proposed settlement of a securities class action lawsuit filed in U.S. District Court in Youngstown in March 2021.
The settlement calls for Lordstown Motors to pay $3 million into an escrow account for the “benefit of putative class members,” the SEC filing states. These litigants would also be entitled to receive a share of proceeds – 25% or $7 million, whichever is less – from any lawsuits that the company retains following the effective date of the modification plan.
Shareholders filed a securities lawsuit against Lordstown Motors Corp. and former executives Steve Burns, Julio Rodriguez and Richard Schmidt, on March 18, 2021 in the Youngstown District Court. The lawsuit alleges that the parties made misrepresentations or failed to disclose material facts during the period between Aug. 3, 2020, and March 17, 2021.
Those misrepresentations, the litigants claim, caused investors to misjudge the value of the company’s shares.
The matter was filed shortly after a damaging short-seller report alleged that Lordstown Motors Corp. and key executives exaggerated the number of preorders for its flagship vehicle, the all-electric Endurance pickup, calling them “largely fictitious.”
The report also questioned the company’s production schedules, its financial status and whether it could launch the Endurance by its proposed deadline, which was that September.
After the report was released, Lordstown Motors Corp.’s stock fell 16.5% in a single day, burning investors who jumped in early after the company announced its merger with blank-check company DiamondPeak Holdings Corp. in August 2020. Lordstown Motors went public in October 2020.
Other class-action lawsuits against Lordstown Motors or its former executives – now combined into a single case – followed in the wake of the short-seller report.
According to Thursday’s filing, the securities litigation settlement is contemplated to be part of a larger settlement related to a $45 million claim the SEC filed against the company last month.
Lordstown Motors in March 2021 disclosed that the SEC had launched an inquiry related to the merger with DiamondPeak and preorders of the Endurance.
Details of the proposed settlement with the SEC were not disclosed. Should a deal be reached, it would set forth a cease and desist order from the commission.
The settlement offer remains subject to the SEC’s approval process and approval of the bankruptcy court, the filing said.
A hearing before the bankruptcy court to consider the proposed plan is scheduled for 10:30 a.m. Feb. 22 before Judge Mary F. Walrath.
On Monday, Lordstown Motors filed a motion requesting the court extend the deadline to file its Chapter 11 reorganization plan to April 1.
Copyright 2024 The Business Journal, Youngstown, Ohio.
