Investor suit claims Lordstown Motors' image 'irreparably damaged' by execs, directors
WILMINGTON, Del. - A civil lawsuit filed by two stockholders alleges that the actions of sixteen executives, directors, and former directors have “irreparably damaged Lordstown Motors corporate image and goodwill.
Investors Daniel and David Cohen filed the lawsuit in U.S. District Court in Delaware late last week.
Unlike the class action lawsuits filed earlier against Lordstown Motors and leading executives, the Cohen complaint was filed on behalf of LMC, naming as defendants CEO Steve Burns, President Phil Schmidt, CFO Julio Rodriguez, Director of Stamping Operations Michael Fabian; Directors David Hamamoto, Mark Gates, Mickey Kowitz, Angela Strand, Martin Rucidlo, Mark Walsh, Andrew Richardson, Dale Spencer; and former Directors Steven Hash, Judith Hannaway, Keith Feldman, Jane Reiss
The complaint claims that some of Lordstown Motors' officers and directors violated federal securities laws, breached their fiduciary duty, and unjustly enriched the defendants.
The Cohens repeated many of the allegations made in previous lawsuits, including CEO Steve Burns’ claim that there were 100,000 ‘pre-sales" of the all-electric Endurance pickup truck that LMC says will begin production this coming September.
“But then, on March 12, 2021, Lordstown Motors’ smooth ride came to a screeching halt,” says the complaint, referring to a report published by Analyst Hindenburg Research alleging that LMC had “no revenue and no sellable product,” further claiming that the company “misled investors on both its demand and production capabilities.”
Hindenberg’s report resulted in LMC’s RIDE stock plummeting more than 16% in one day, “representing a $517 million lost in market capitalization,” according to the complaint.
The complaint also cites a March 24 tweet from Hindenberg Research purporting to show the Endurance breaking down during a commercial video shoot last summer, requiring the truck to be towed away.
The Cohen complaint credits that tweet for a 10% decline in RIDE’s share value, “erasing an additional $213 million in stockholder value.”
21 News reached out to LMC’s public relations firm for a response to the Hindenberg tweet, and the Cohen lawsuit. As of Tuesday morning, we are still waiting for a reply.
The Cohens say the actions of the sixteen defendants have “devastated Lordstown Motors’ credibility and caused the Company to lose more than $1 billion in market capitalization.”
The suit seeks a jury trial to determine if the defendants violated federal security laws, breached their fiduciary duties, and were unjustly enriched.” The complaint asks the court to order directors and executives to return the compensation paid to them from LMC.
Despite characterizing the damage to LMC's image as irreparable, the two investors say they want the company to reform its corporate governance by allowing stockholders to vote on amendments to LMC’s bylaws and nominate three candidates to the Board of Directors.
The defendants have not filed a response to the complaint.
Steve Burns has previously said that LMC would "vigorously defend" against the previous lawsuits, as well as cooperate with the Securities and Exchange investigation.
