Lawsuit claims Lordstown Motors execs presented 'unrealistically positive assessment' of business
In a new class action lawsuit, an investor in Lordstown Motors claims that CEO Edward Hightower and CFO Adam Kroll knowingly and intentionally mislead and withheld information from investors, leading those investors to have an "unrealistically positive assessment of Lordstown and its business, operations, and prospects."
In the 26-page suit, filed in the Northern Ohio United States District Court's eastern division, Lordstown Motors investor Bandol Lim claims that Hightower and Kroll purposely mislead investors into believing that Lordstown Motors and it's partnership with Foxconn was going better than it actually was, all while knowing information to the contrary.
The suit results from and directly mention's Lordstown's June 27, 2023 bankruptcy filing, where they claim that Foxconn fell through on its obligations, causing Lordstown's operations to fail and go under.
According to the suit, information relating to this deteriorating agreements was well known by Hightower and Kroll, but not told to investors, who suffered substantial losses as Lordstown's agreements with Foxconn continued to deteriorate outside of the public eye.
The lawsuit highlights several statements made by Hightower during earnings reports which paint an unrealistically positive picture of Lordstown's operations, despite Hightower having knowledge that their partnership with Foxconn was souring.
The primary claim in the suit states that Lordstown was reliant on the $100 million in the Joint Venture agreement with Foxconn to stay afloat, yet when that agreement began to sour, did not tell investors that information.
"Lordstown knew but failed to disclose that the financial life of the Company was imperiled by its strained relationship with Foxconn and if the partnership failed, the company faced bankruptcy."
Indeed, when those partnerships eventually deteriorated, Lordstown Motors was forced to declare bankruptcy, and levied their own claims in the filing that “Foxconn's fraud and willful and consistent failure to live up to its commercial and financial commitments to the Company” led to the decision to declare bankruptcy and restructure.
Foxconn responded to that lawsuit, stating in part that "[Lordstown Motors] has continuously attempted to mislead the public and has been reluctant to perform the investment agreement between the two parties in accordance with its terms."
The response from Foxconn goes on to say that they view Lordstown's claims as "false" and "malicious."
True or not, the decline of Lordstown Motors had a substantial cost to investors, some of whom may have faced a whopping 92.51% loss after Lordstown's stock saw steep declines, went through a reverse-split, and declined further. An investor who purchased $1,000 in Lordstown Motors stock on August 5, 2022 would have just $74.90 today.
The suit, which the plaintiff requested go to a jury trial, seeks to award compensation and punitive damages to members of the class, in an amount to be determined and proven in trial.