LORDSTOWN, Ohio – The fallout from a short-seller’s report released in March is still reverberating as a fifth class-action lawsuit has been filed against electric-vehicle manufacturer Lordstown Motors Corp.
Investor Raymond Romano filed the complaint in U.S. District Court in Youngstown May 13.
The complaint alleges that Lordstown Motors, its CEO, and former directors of its predecessor, DiamondPeak Holdings Corp., misled investors about pre-orders the company claimed to have secured for its all-electric Endurance pickup.
DiamondPeak, a special purpose acquisition company, or SPAC, announced it would merge with Lordstown Motors August 3 with the intent on taking the company public. DiamondPeak shareholders agreed to the merger Oct. 23 and Lordstown Motors began trading on the NASDAQ exchange under the ticker symbol RIDE Oct. 26.
According to the lawsuit, Romano held shares of DiamondPeak as of Sept. 21, 2020, and had a right to vote on the merger. At that time, DiamondPeak’s stock value had climbed to $31.40 per share, according to NASDAQ. On Thursday, the stock, traded under the Lordstown Motors RIDE symbol, closed at $6.98 per share.
The complaint alleges DiamondPeak issued proxy statements that contained materially false information intended to influence shareholder votes in favor of the merger.
“The defendants solicited approval for the merger from the plaintiff and other members of the proposed class by means of a proxy statement that contained false and misleading statements,” the lawsuit said.
Court papers say these misleading statements – especially related to the nature of more than 100,000 pre-orders of the Endurance – continued after the merger was completed.
The complaint names Lordstown Motors, its CEO Steve Burns and director David Hamamoto as defendants. It also names former DiamondPeak directors Mark Walsh, Andrew Richardson, Steven Hash and Judith Hannaway as defendants.
On March 12, short-seller Hindenburg Research published a scathing analysis of Lordstown Motors, alleging it faked pre-orders of more than 100,000 vehicles and that the Endurance was far behind in its production schedule.
The reaction was swift on Wall Street, as Lordstown Motors’ share prices tumbled more than 16% that day.
Also in March, the company acknowledged that the U.S. Securities and Exchange Commission had initiated an inquiry into the company, and that Lordstown Motors was cooperating.
The announcement caused shares to slip further, and the company’s value has yet to rebound.
Lordstown Motors is in the process of building beta models of the Endurance at the former General Motors complex in Lordstown. These are models used for mostly safety validation and performance testing. The company expects to begin pre-production of the pickup this summer and move into full production by the end of September.
Four earlier class action lawsuits were filed against the company in the Youngstown court in the wake of the Hindenburg report. A sixth investor lawsuit on behalf of Lordstown Motors against its CEO and former directors of DiamondPeak was filed earlier this month in U.S. District Court in Delaware.
Lordstown Motors plans to issue its 2021 first quarter financials May 17. The company also said last week that it would restate its financials for 2020 because of new SEC guidelines that determined stock warrants at the time of SPAC mergers should be declared as liabilities and not equity.
Copyright 2021 The Business Journal, Youngstown, Ohio.
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May 14, 2021 at 11:45PM
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