Lightning eMotors hit with securities lawsuit

LOVELAND — Lightning eMotors Inc. (NYSE: ZEV) has been sued in U.S. District Court in Denver for alleged violations of federal securities laws.

The lawsuit was filed by New York City firm Pomerantz LP on behalf of a Pennsylvania plaintiff, Johnny Shafer. Six other law firms, three more in New York and one each in Boston, Los Angeles and San Diego, issued press releases noting that a class-action lawsuit had been filed. The press statements didn’t say they had filed lawsuits but gave information and instruction on how to join the action.

The lawsuit also names Lightning eMotors co-founder and CEO Tim Reeser and CFO Teresa Covington.

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A Lightning eMotors spokesperson said via email, “We cannot comment on any pending litigation. Thank you.” Requests for comment to Pomerantz attorneys Jeremy Lieberman and J. Alexander Hood II weren’t returned.

Lawsuit

Lightning eMotors designs, makes and sells electric fleet vehicles including vans, ambulances, buses and trucks, and electric powertrains for some vehicles. It occupies 231,000 square feet of 812,000 square feet at The Forge campus in Loveland. As of July, it employed 180 and was hiring for 100 more.

It went public May 7 via a merger with Palo Alto, California-based GigCapital3 Inc., a special purpose acquisition company, or SPAC. SPACs are public companies formed to buy private firms as an alternative to conventional initial public offerings.

Lightning eMotors reported results for its first quarter on May 18 and its second quarter on Aug. 16.

The lawsuit alleges that between May 7 and Aug. 16, “defendants made materially false and misleading statements regarding the company’s business, operations and compliance policies.”

Specifically, the lawsuit said Lightning eMotors as it went public in May didn’t disclose that it would report a higher quarterly loss in its second quarter ended June 30, compared with the same period last year.

The second-quarter loss was 79 cents per share, compared with a loss of 10 cents per share, year-over-year.

Revenue grew 580% to $5.9 million, and gross margins improved, but operating expenses rose sevenfold to $16.8 million, and its net loss was $46.1 million, compared with a loss of $2.8 million year-over-year.

Lightning eMotors said supply-chain and COVID-related problems had delayed some orders until 2022 but no orders had been canceled.

Chief procurement officer Stephen Isvan had resigned May 27, three weeks after Lightning eMotors went public. He’d been hired in March. His duties included managing purchasing and supply chains.

The company on Aug. 16 withdrew 2021 annual guidance. It expects revenue for its third quarter ended Sept. 30 to be between $4 million and $6 million, with losses of about $12 million to $13 million.

Value

When the acquisition was announced in December, it valued Lightning eMotors at $823 million. The company gained 10.5% in its first day of trading in May, closing at $8.64 and raising $268 million.

On Aug. 10, the company said it had signed a contract with Indiana-based Forest River Inc. The RV maker is owned by Warren Buffett’s Berkshire Hathaway Inc. holding company in Omaha, Nebraska. 

The four-year deal to provide powertrains for up to 7,500 zero-emission buses is expected to be worth up to $850 million.

Lightning eMotors shares traded above $12 that day, closing at $11.60. By mid-August, a few days before its quarterly report, shares had settled back to $10 a share. On Aug. 17, after its second-quarter report, it saw shares fall from $9.63 to close at $8.

“As a result” of the company’s actions, the lawsuit said, “and the precipitous decline in the market value of [its stock] plaintiff and other class members have suffered significant losses and damages.”

The lawsuit said Shafer bought 100 shares of Lightning eMotors stock for $10.35 on Aug. 10.

SPACs

About a dozen law firms had issued press releases in August saying they were “investigating” Lightning eMotors after its second-quarter report.

A Bloomberg Law article in August said Avi Katz, a principal in the SPAC that took Lightning eMotors public, had been sued because the acquisition firm “was structured to reward them even for a bad deal.”

A search for lawsuits turned up six filed in April and May in Delaware, New York and California district courts.

A 2021 mid-year assessment of securities lawsuits by San Francisco-based Cornerstone Research said U.S. securities lawsuits overall had declined 25% to 112 actions, compared with the previous six months. This was lower than at any time since the first half of 2015. But SPAC lawsuits had doubled to 14 over the same period. Cornerstone collaborates with Stanford Law School on a Securities Class Action Clearinghouse.

CNBC has also reported on the increase in SPAC lawsuits this year.

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