Investors file class-action suit against Workhorse Group
LOS ANGELES - An Ohio company that recently lost a bid for a multi-billion-dollar contract to make the next generation of postal delivery trucks is named as a defendant in a class action lawsuit filed by investors claiming U.S. securities violations.
The civil action filed in U.S. District Court on Monday alleges that the Workhorse Group and its officers made false and misleading statements regarding its effort to win the $6.3 billion contract to manufacture 165,000 vehicles that eventually was awarded to Oshkosh Defense of Wisconsin.
Unlike the Workhorse bid which was for all-electric vehicles, Oshkosh said ten percent of its trucks would be electric while the remaining vehicles would be powered by conventional internal combustion engines that could be retrofitted to keep up with technology.
The complaint claims that Workhorse failed to disclose that it was “merely hoping that USPS was going to select an electric vehicle as its Next Generation Delivery Vehicle and had no assurance or indication from USPS that this was the case.”
In addition, the suit alleges that Workhorse concealed information that electrifying the entire postal service fleet would be impractical and expensive.
When the postal service announced the Oshkosh award last month, securities of Workhorse fell $14.88 per share, or 47%, to close at $16.47. The price continued to drop in after-hours trading and opened on February 24, 2021 at a price of $14.07, a fall of over 50% from the previous open, which, according to the complaint damaged those who invested in Workhorse since July.
The complaint says Workhorse executives were involved in making false and misleading public statements that inflated the value of the stock.
The lawsuit seeks a jury trial to determine the amount of alleged damages to investors.
The suit does not yet list the number of investors who could join the class action.
Workhorse has not yet filed a response.
The lawsuit was filed on the same day that Workhorse stock value experienced a slight rebound amid several news items.
On Monday, Workhorse shares temporarily rose to $16.73 before closing at $15.52 per share.
The increase was accompanied by news that Congressman Tim Ryan (OH-13) urged the Securities and Exchange Commission (SEC) to investigate a $54 million stock purchase made a day before Postmaster General Louis DeJoy announced a contract for the Oshkosh Corporation worth $6 billion to replace the United States Postal Service’s fleet of vehicles.
Last week, Congressman Ryan, Congresswoman Marcy Kaptur, and Senator Sherrod Brown wrote a letter to President Biden urging him to halt the postal truck contract until a review can be conducted on whether inappropriate political influence was involved in the decision.
In addition, Rep. Ryan has signed on as a co-sponsor to the Postal Vehicle Modernization Act submitted by Representative Jared Huffman (D-CA).
Huffman, a member of the House Committee on Transportation and Infrastructure, says the legislation would provide $6 billion in funding to electrify the United States Postal Service’s vehicle fleet.
“By electrifying the Postal Service fleet, we have an opportunity to boost our economy, slash emissions, and save the crumbling Postal Service,” said Huffman.” The benefits and need for action could not be clearer – President Biden himself has called for complete federal vehicle electrification.”
If passed, the legislation would require that at least 75% of the new fleet purchased be electric/zero-emission.
Workhorse CEO Duane Hughes said the company met Wednesday with USPS officials to discuss bid process rules and further specifics of the bid selection process.
"We will continue to follow the proper due course procedures as defined by the USPS and will also look to other options available to us," said Workhorse CEO Duane Hughes." In the interim, we have retained the services of leading legal and corporate advisory firms, including Akin Gump Straus Hauer & Feld LLP and Mound Cotton Wollan & Greengrass LLP, to identify our options and pursue them effectively."
Steve Burns, the former CEO of Workhorse and now the CEO of Lordstown Motors said in 2019 that if Workhorse won the postal contract, he would try to convince Workhorse to manufacture the postal vehicles in portions of the same former General Motors Assembly plant in Lordstown where LMC is planning to make the all-electric Endurance pickup trucks.
In 2019, Workhorse signed a three-year intellectual property licensing agreement with Lordstown Motors regarding the Workhorse W-15 electric pickup truck in exchange for an initial equity stake of 10% in LMC.
A copy of the complaint may be seen below:]
