Canoo hit with shareholder derivative suit over SPAC merger statements

2 minute read

A boardroom is seen in an office building in Manhattan, New York City, New York, U.S., May 24, 2021. REUTERS/Andrew Kelly

Register now for FREE unlimited access to Reuters.com
  • Suit follows Canoo's $2.4 billion SPAC merger in 2020
  • Canoo faces three other suits in California federal court

(Reuters) - A Canoo Inc investor hit the electric vehicle maker’s board members and executives with a derivative suit on Friday, alleging they made false statements about its engineering business in connection with its $2.4 billion merger with a blank check company.

Shareholder Claude Patterson, whose lawyers include attorneys from Robbins Geller Rudman & Dowd, sued officers and board members at Los Angeles-based Canoo and blank check company Hennessy Capital Acquisition Corp IV in Delaware federal court over claims they failed to protect shareholders’ interests.

Blank check companies, or special purpose acquisition companies, raise funds through initial public offerings to later merge with privately held companies and take them public.

Register now for FREE unlimited access to Reuters.com

The derivative suit adds to Canoo’s mounting legal woes. The company faces at least three proposed class actions in a California federal court that claim securities fraud for making false and misleading statements related to the merger.

Representatives for Canoo and Hennessy Capital did not immediately respond to requests to comment on Monday.

Canoo and Hennessy Capital announced their plans to merge in August 2020, according to a press release. The combined company took Canoo’s name and began trading on Nasdaq when the deal closed in December.

Patterson alleged in the complaint that Canoo’s leader allowed the company to tout the value of its engineering and technology business in statements promoting the merger and later a public offering of securities. The investor, however, claimed that the company abandoned the business unit before the merger.

The suing shareholder also said that Canoo’s public statements highlighted an agreement with Hyundai Motor Group to co-develop an electric vehicle platform in the future, when that agreement had been put “on hold” before the merger, according to the complaint.

Patterson said in the complaint that once those developments were revealed in April 2021, the company’s stock plummeted, hurting shareholders.

Along with having the defendants compensate the company for the losses, Patterson asked the court to direct Canoo to reform its corporate governance measures.

The case is Patterson v. Hennessy, U.S. District Court for the District of Delaware, No. 1:21-cv-00907.

For Patterson: Travis Downs, Benny Goodman and Erik Luedeke of Robbins Geller Rudman & Dowd; Brian Robbins of Robbins; and Peter Andrews and Craig Springer of Andrews & Springer

Counsel information for Canoo’s board members and executives was not immediately available.

Read more: U.S. EV startup Canoo to go public at $2.4 billion valuation

Register now for FREE unlimited access to Reuters.com

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Sierra Jackson reports on legal matters in major mergers and acquisitions, including deal work, litigation and regulatory changes.