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Industry leading energy technology company Romeo lied about its supply chain to increase share prices, causing shareholders significant financial losses, a new class action lawsuit alleges.
The class action lawsuit was filed in New York on May 6 by lead Plaintiff Victor Toner, who alleges the company made false and misleading statements about the availability of battery cells for its products, the number of suppliers it had, and its projected earnings for 2021.
Toner is suing the company and its executives for violations of the Securities Exchange Act, saying that he and other shareholders “suffered significant losses and damages” due to Romeo’s wrongful acts and omissions.
Romeo, which was founded in 2016, is focused on designing and manufacturing lithium-ion battery modules and packs for commercial electric vehicles and the company’s core product offering serves the battery electric vehicle medium duty short haul and heavy duty long haul trucking markets, as well as specialty trucking and buses, according to the class action lawsuit.
In 2020, Romeo said that its estimated revenue for the year was $11 million, and it would reach $140 million for 2021. The company said it would achieve revenue growth through “key partnerships” and close supply relationships with LG Chem, Samsung, Murata, and SK Innovation, which manufacture battery cells, a key component in Romeo’s battery modules and packs, the claim states.
“Defendants represented that Romeo had the capacity and supply to meet end-user demand for Romeo’s products, that Romeo was not beholden ‘to any level of the value chain’, that its supply was hedged, and that it did not see any material challenges that would hamper growth,” the claim states.
However, according to the class action lawsuit, unknown to investors, Romeo was suffering from an acute shortage of high quality battery cells due to supply constraints.
The claims says that contrary to its claims, Romeo only had two battery cell suppliers, not four; future potential risks that the company had warned of concerning supply disruption or shortage had already occurred; Romeo did not have the battery cell inventory to accommodate end-user demand and ramp up production in 2021; and Romeo’s supply constraint was a material hindrance to Romeo’s revenue growth.
“Given the supply constraint that Romeo was experiencing during the Class Period, Defendants had no reasonable basis to represent that the Company had the ability to meet customer demand and that it would support growth in revenue in 2021,” the class action lawsuit says.
Investors discovered the truth when Romeo filed a press released in March, 2021 saying that the company’s production had been hampered by a shortage in supply of battery cells and that its estimated 2021 revenue would therefore be reduced by approximately 71-87 percent.
“On March 31, 2021, Morgan Stanley issued a research report in which it downgraded Romeo’s target price per share from $12 to $7,” the claim adds.
Toner wants to represent anyone who purchased Romeo securities between Oct. 5, 2020 and March 30, 2021. He is suing for violations of the Securities Exchange and seeks classification of the Class, damages, interest, legal fees, and a jury trial.
Recently, a number of other companies have been hit with class action lawsuits for falsely inflating share prices in violation of the Securities Exchange Act. This month, biopharmaceutical company FibroGen, which produces anemia fighting drug Roxa, was hit with a class action lawsuit for alleged misrepresentations and omissions about the efficacy of the drug, artificially inflating the price of FibroGen’s securities.
Do you own any shares in Romeo? Let us know in the comments section!
Toner is represented by Jeremy A. Lieberman, J. Alexander Hood II, and James M. LoPiano of Pomerantz LLP
The Romeo Shareholders Class Action Lawsuit is Toner v. Romeo Power Inc. (f/k/a RMG Acquisition Corp.), et al., Case No. 1:21-cv-04058, in the United States District Court Southern District of New York.
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One thought on Electric Vehicle Battery-Maker Romeo Artificially Inflated Share Prices, Class Action Claims
Yes. I won shares. Am losing over 50% st this point.