Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 1 of 28 Page ID #:1
`
`
`Robert V. Prongay (SBN 270796)
` rprongay@glancylaw.com
`Charles Linehan (SBN 307439)
` clinehan@glancylaw.com
`Pavithra Rajesh (SBN 323055)
` prajesh@glancylaw.com
`GLANCY PRONGAY & MURRAY LLP
`1925 Century Park East, Suite 2100
`Los Angeles, California 90067
`Telephone: (310) 201-9150
`Facsimile: (310) 201-9160
`
`Attorneys for Plaintiff Justin Kojak
`
`[Additional Counsel on Signature Page]
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`
`Case No.
`
`CLASS ACTION COMPLAINT
`FOR VIOLATIONS OF THE
`FEDERAL SECURITIES LAWS
`
`JUSTIN KOJAK, Individually and On
`Behalf of All Others Similarly Situated,
`
`Plaintiff,
`
`v.
`
`CANOO INC. f/k/a HENNESSY
`CAPITAL ACQUISITION CORP. IV,
`ULRICH KRANZ, TONY AQUILA,
`DANIEL J. HENNESSY, NICHOLAS
`A. PETRUSKA, BRADLEY BELL,
`PETER SHEA, RICHARD BURNS,
`JAMES F. O’NEIL III, JUAN
`CARLOS MAS, GRETCHEN W.
`MCCLAIN, and GREG ETHRIDGE,
`
`Defendants.
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`CLASS ACTION COMPLAINT
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`Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 2 of 28 Page ID #:2
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`Plaintiff Justin Kojak (“Plaintiff”), individually and on behalf of all others
`similarly situated, by and through his attorneys, alleges the following upon
`information and belief, except as to those allegations concerning Plaintiff, which are
`alleged upon personal knowledge. Plaintiff’s information and belief is based upon,
`among other things, his counsel’s investigation, which includes without limitation:
`(a) review and analysis of regulatory filings made by Canoo Inc. (“Canoo” or the
`“Company”) f/k/a Hennessy Capital Acquisition Corp. IV (“Hennessy Capital”)
`with the United States (“U.S.”) Securities and Exchange Commission (“SEC”); (b)
`review and analysis of press releases and media reports issued by and disseminated
`by Canoo; and (c) review of other publicly available information concerning Canoo.
`NATURE OF THE ACTION AND OVERVIEW
`1.
`This is a class action on behalf of persons and entities that purchased or
`otherwise acquired Canoo securities between August 18, 2020 and March 29, 2021,
`inclusive (the “Class Period”). Plaintiff pursues claims against the Defendants under
`the Securities Exchange Act of 1934 (the “Exchange Act”).
`2.
`Canoo Holdings Ltd. (“Canoo Holdings”) was an electric vehicle
`company that touted a “unique business model that defies traditional ownership to
`put customers first.” It has announced a delivery vehicle (to launch in 2022), pickup
`truck (to launch in 2023), and van, all of which are built on the same underlying
`technological platform.
`3.
`Hennessy Capital was a blank check company formed for the purpose
`of effecting a merger, capital stock exchange, asset acquisition, stock purchase,
`reorganization or similar business combination. On or about December 21, 2020,
`Canoo Holdings became a public entity via merger with Hennessy Capital, with the
`surviving entity named “Canoo.”
`4.
`On March 29, 2021, after the market closed, Canoo revealed that the
`Company would no longer focus on its engineering services line, which had been
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`Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 3 of 28 Page ID #:3
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`touted in the SPAC merger documents just three months earlier and formed the basis
`of Canoo’s growth story.
`5.
`On this news, the Company’s stock price fell $2.50, or 21.19%, to close
`at $9.30 per share on March 30, 2021, on unusually heavy trading volume.
`6.
`Throughout the Class Period, Defendants made materially false and/or
`misleading statements, as well as failed to disclose material adverse facts about the
`Company’s business, operations, and prospects. Specifically, Defendants failed to
`disclose to investors: (1) that Canoo had decreased its focus on its plan to sell
`vehicles to consumers through a subscription model; (2) that Canoo would de-
`emphasize its engineering services business; (3) that, contrary to prior statements,
`Canoo did not have partnerships with original equipment manufacturers and no
`longer engaged in the previously announced partnership with Hyundai; and (4) that,
`as a result of the foregoing, Defendants’ positive statements about the Company’s
`business, operations, and prospects were materially misleading and/or lacked a
`reasonable basis.
`7.
`As a result of Defendants’ wrongful acts and omissions, and the
`precipitous decline in the market value of the Company’s securities, Plaintiff and
`other Class members have suffered significant losses and damages.
`JURISDICTION AND VENUE
`8.
`The claims asserted herein arise under Sections 10(b) and 20(a) of the
`Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated
`thereunder by the SEC (17 C.F.R. § 240.10b-5).
`9.
`This Court has jurisdiction over the subject matter of this action
`pursuant to 28 U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. §
`78aa).
`10. Venue is proper in this Judicial District pursuant to 28 U.S.C. §
`1391(b) and Section 27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts
`in furtherance of the alleged fraud or the effects of the fraud have occurred in this
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`Judicial District. Many of the acts charged herein, including the dissemination of
`materially false and/or misleading information, occurred in substantial part in this
`Judicial District. In addition, the Company’s principal executive offices are in this
`District.
`11.
`In connection with the acts, transactions, and conduct alleged herein,
`Defendants directly and indirectly used the means and instrumentalities of interstate
`commerce, including the United States mail, interstate telephone communications,
`and the facilities of a national securities exchange.
`PARTIES
`12. Plaintiff Justin Kojak, as set forth in the accompanying certification,
`incorporated by reference herein, purchased Canoo securities during the Class
`Period, and suffered damages as a result of the federal securities law violations and
`false and/or misleading statements and/or material omissions alleged herein.
`13. Defendant Canoo is incorporated under the laws of Delaware with its
`principal executive offices located in Torrance, California. Canoo’s common stock
`trades on the NASDAQ exchange under the symbol “GOEV,” and its warrants trade
`under the symbol “GOEVW.” Hennessy Capital was incorporated under the laws of
`Delaware with its principal executive offices located in Wilson, Wyoming. Prior to
`the Merger, Hennessy Capital’s Class A common stock traded on the NASDAQ
`exchange under the symbol “HCAC,” its redeemable units under the symbol
`“HCACW,” and its units (each consisting of one share of Class A common stock
`and three-quarters of one redeemable warrant) under the symbol “HCACU.”
`14. Defendant Ulrich Kranz (“Kranz”) was the Chief Executive Officer
`(“CEO”) of Canoo at all relevant times. Kranz cofounded Canoo Holdings.
`15. Defendant Tony Aquila (“Aquila”) has been a director of the Company
`since the closing of the Merger and was named an incoming director in the Merger
`documents. He served as a Executive Chairman of Hennessy Capital from October
`20, 2020 to the closing of the Merger.
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`Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 5 of 28 Page ID #:5
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`16. Defendant Daniel J. Hennessy (“Hennessy”) was the Chairman of
`Hennessy Capital’s Board of Directors and CEO of Hennessy Capital at the time of
`the Merger.
`17. Defendant Nicholas A. Petruska (“Petruska”) was the Executive Vice
`President and CFO of Hennessy Capital at the time of the Merger.
`18. Defendant Bradley Bell (“Bell”) was a director of Hennessy Capital at
`the time of the Merger.
`19. Defendant Peter Shea (“Shea”) was a director of Hennessy Capital at
`the time of the Merger.
`20. Defendant Richard Burns (“Burns”) was a director of Hennessy Capital
`at the time of the Merger.
`21. Defendant James F. O’Neil III (“O’Neil”) was a director of Hennessy
`Capital at the time of the Merger.
`22. Defendant Juan Carlos Mas (“Mas”) was a director of Hennessy
`Capital at the time of the Merger.
`23. Defendant Gretchen W. McClain (“McClain”) was a director of
`Hennessy Capital at the time of the Merger.
`24. Defendant Greg Ethridge (“Ethridge”) was a director of Hennessy
`Capital at the time of the Merger.
`25. Defendants Kranz, Aquila, Hennessy, Petruska, Bell, Shea, Burns,
`O’Neil, Mas, McClain, and Ethridge (collectively the “Individual Defendants”),
`because of their positions with the Company, possessed the power and authority to
`control the contents of the Company’s reports to the SEC, press releases and
`presentations to securities analysts, money and portfolio managers and institutional
`investors, i.e., the market. The Individual Defendants were provided with copies of
`the Company’s reports and press releases alleged herein to be misleading prior to, or
`shortly after, their issuance and had the ability and opportunity to prevent their
`issuance or cause them to be corrected. Because of their positions and access to
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`Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 6 of 28 Page ID #:6
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`material non-public information available to them, the Individual Defendants knew
`that the adverse facts specified herein had not been disclosed to, and were being
`concealed from, the public, and that the positive representations which were being
`made were then materially false and/or misleading. The Individual Defendants are
`liable for the false statements pleaded herein.
`SUBSTANTIVE ALLEGATIONS
`Background
`26. Canoo Holdings was an electric vehicle company that touted a “unique
`business model that defies traditional ownership to put customers first.” It has
`announced a delivery vehicle (to launch in 2022), pickup truck (to launch in 2023),
`and van, all of which are built on the same underlying technological platform.
`27. Hennessy Capital was a blank check company formed for the purpose
`of effecting a merger, capital stock exchange, asset acquisition, stock purchase,
`reorganization or similar business combination. On or about December 21, 2020,
`Canoo Holdings became a public entity via merger with Hennessy Capital, with the
`surviving entity named “Canoo.”
`Materially False and Misleading
`Statements Issued During the Class Period
`28. The Class Period begins on August 18, 2020. On that day, Hennessy
`Capital and Canoo Holdings issued a joint press release announcing the Merger. The
`press release stated, in relevant part:1
`Canoo Co-Founder and Chief Executive Officer, Ulrich Kranz said,
`“Today marks an important milestone of Canoo’s effort to reinvent the
`development, production and go-to-market model of the electric vehicle
`industry. Our technology allows for rapid and cost-effective vehicle
`development through the world’s flattest skateboard architecture, and
`we believe our subscription model will transform the consumer
`ownership experience. We are excited to partner with Hennessy Capital
`and we are energized to begin our journey through a shared passion to
`
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`1 Unless otherwise stated, all emphasis in bold and italics hereinafter is added.
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`Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 7 of 28 Page ID #:7
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`deliver an environmentally friendly and versatile vehicle development
`platform to the market.”
`Daniel Hennessy, Chairman & Chief Executive Officer of HCAC said,
`“We are thrilled to partner with Canoo on their mission to reinvent
`urban mobility with a greener, simpler and more affordable portfolio of
`EV solutions. Unlike any other EV company, Canoo has created a go-
`to-market strategy that captures both B2C and B2B demand with the
`same skateboard architecture and technology that has already been
`validated by key partnerships such as with Hyundai. HCAC has an
`abiding commitment to sustainable technologies and infrastructure, and
`we are excited to serve as a catalyst to advance the launch of the Canoo
`vehicle offerings.”
`
`*
`*
`*
`Canoo’s consumer go-to-market strategy capitalizes on changing
`consumer preferences to deliver a month-to-month, commitment-free,
`subscription-based business model. With a single monthly fee and no
`upfront payment, Canoo members enjoy the benefits of an all-inclusive
`experience that, in addition to your own canoo vehicle, includes
`maintenance, warranty, registration and access to insurance and vehicle
`charging. This go-to-market model
`is designed
`to deliver an
`affordable and simplified customer experience while also enhancing
`lifetime vehicle revenue and margin to shareholders.
`29. On September 18, 2020, the Company filed its Registration Statement
`on Form S-1 with the SEC. The Registration Statement was subsequently amended
`on October 23, 2020 and November 27, 2020, making substantially the same
`statements as identified herein. The Company also filed its Prospectus on Form
`424b3 with the SEC on December 4, 2020, making substantially the same
`statements. The Registration Statement was signed by defendants Hennessy,
`Petruska, Bell, Shea, Burns, O’Neil, Mas, McClain, and Ethridge. It touted Canoo’s
`engineering services, stating:
`ENGINEERING AND TECHNOLOGY SERVICES
`Canoo’s engineering and technology services business covers all the
`material consulting and contract engineering work that is in high
`demand due to our team’s specialized experience and technical
`capabilities in EV development. This business offers a unique
`opportunity to generate immediate revenues in advance of the
`offering of our first vehicles and our current pipeline in this area is
`supportive of a projected $120 million of revenue in 2021. We expect
`our engineering and technology services business to offer significant
`growth potential in the future as projected demand grows for EVs and
`their related technologies, namely in platform/skateboard development,
`powertrain, battery technologies and power electronics, among other
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`Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 8 of 28 Page ID #:8
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`areas, in which we have substantial expertise. In addition to providing
`external commercial validation of Canoo’s technical capabilities,
`these contract engagements establish an attractive strategic pipeline
`for future business opportunities and de-risk our overall business
`model.
`Canoo’s pipeline for engineering services includes EV concept design
`and engineering services for other OEMs, autonomous driving
`strategics and high growth technology companies. There is a significant
`market for contract engineering services among legacy OEMs who lack
`the expertise to develop an electric powertrain at the pace needed to
`capitalize on the rising regulatory requirements and global demand for
`EVs. Canoo is at a distinct competitive advantage to capitalize on this
`growing demand. In fact, whereas other new EV entrants are forced to
`license key
`technologies and/or outsource primary engineering
`development to larger OEMs, Canoo has already received significant
`OEM interest in our skateboard technology and our team’s expertise
`in platform engineering, powertrains and vehicle design, as is
`exemplified by the announcement of an agreement between Hyundai
`Motor Group and Canoo for the co-development of a future EV
`platform based on Canoo’s modular skateboard technology.
`Contract engineering opportunities serve as concrete points of external
`validation for our technology and the talent of our team, as well as
`provide additional sources of revenue and long-term commercial
`opportunities (such as skateboard and technology licensing) as the
`relationship matures. Canoo is also in discussions with a number of
`other partners and expects to be in a position to announce many more
`partnerships in due course.
`30. The Registration Statement also touted Canoo’s engineering services as
`a “Competitive Strength[],” stating:
`Contract Engineering services offer a separate revenue stream and
`validate the quality of our technology
`There exists significant market potential for contract engineering
`services among legacy OEMs who lack the expertise to develop an
`electric powertrain at the pace needed to capitalize on the rising
`regulatory requirements and global demand for EVs. Canoo is at a
`distinct competitive advantage to capitalize on this growing demand by
`leveraging the extensive knowledge and experience of its world class
`team. In fact, whereas other new EV entrants are forced to license key
`technologies or outsource primary engineering development to larger
`OEMs, Canoo has already received significant OEM interest in our
`skateboard
`technology and our
`team’s expertise
`in platform
`engineering, powertrains and vehicle design.
`31. Similarly, the Registration Statement stated that Hennessy Capital’s
`Board considered Canoo’s engineering services and subscription model to be
`“positive factors” supporting the Merger, stating:
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`Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 9 of 28 Page ID #:9
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`In considering the Business Combination, the HCAC Board concluded
`that Canoo substantially met the above criteria. In particular, the HCAC
`Board considered the following positive factors, although not weighted
`or presented in any order of significance:
`*
`*
`*
` B2B Engineering and Licensing Opportunities: Canoo’s
`engineering and technology services business includes
`consulting and contract engineering work that is in high
`demand due to the team’s unique experience and technical
`capabilities. Canoo’s pipeline for engineering services
`includes EV concept design and engineering services for
`other OEMs, autonomous driving strategics and high
`growth
`technology companies. Canoo has already
`received significant interest in its skateboard technology
`and the Canoo team’s expertise in platform engineering,
`powertrains and vehicle design, as is exemplified by the
`announcement of an agreement between Canoo and
`Hyundai Motor Group for the co-development of a
`future EV platform based on Canoo’s modular
`skateboard technology. In addition to providing external
`commercial validation of Canoo’s technical capabilities,
`these contract engagements establish an attractive
`strategic pipeline for future business opportunities and
`de-risk the overall business model.
` Compelling Financial Model with Long-Term Attractive Margin
`and Cash Flow Generation Potential. Canoo’s subscription-
`based consumer model deviates from the traditional OEM model
`of vehicle sales or traditional leases, and can achieve attractive
`returns by elongating the revenue generation horizon of a single
`vehicle over the long life of the asset. Under a consumer
`subscription model, Canoo generates consistent cash flows, an
`estimated margin of approximately four times that of a one-time
`sale, and compelling return on equity given the leveragability of
`the underlying individual vehicle assets (with an estimated
`advance rate on vehicle bill of materials and production cost in
`excess of 80% over time and attractive financing terms through
`the over half a trillion dollar market for automotive financing
`and securitization). Further, Canoo is much less dependent on
`new vehicle sales creating a considerably more profitable and
`resilient business model which is expected to create steady and
`recurring cash flow. Revenues from traditional sales models of
`the last-mile delivery vehicles and contract engineering and
`licensing opportunities also are anticipated by Canoo
`management to have attractive margins.
`32. On December 21, 2020, stockholders voted at a special meeting to
`approve the Merger based on the Registration Statement, as amended, and
`Prospectus.
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`33. On January 13, 2021, Canoo filed a registration statement on Form S-1
`for the issuance of common stock upon the exercise of certain warrants. Therein, the
`Company touted its engineering services line and the Hyundai partnership, stating:
`ENGINEERING AND TECHNOLOGY SERVICES
`Our engineering and technology services business covers all the
`material consulting and contract engineering work that is in high
`demand due to our team’s specialized experience and technical
`capabilities in EV development. This business offers a unique
`opportunity to generate immediate revenues in advance of the offering
`of our first vehicles and our current pipeline in this area is supportive of
`a projected $120 million of revenue in 2021. We expect our
`engineering and technology services business to offer significant
`growth potential in the future as projected demand grows for EVs and
`their related technologies, namely in platform/skateboard development,
`powertrain, battery technologies and power electronics, among other
`areas, in which we have substantial expertise. In addition to providing
`external commercial validation of our technical capabilities, these
`contract engagements establish an attractive strategic pipeline for future
`business opportunities and de-risk our overall business model.
`Our pipeline for engineering services includes EV concept design and
`engineering services for other OEMs, autonomous driving strategics
`and high growth technology companies. There is a significant market
`for contract engineering services among legacy OEMs who lack the
`expertise to develop an electric powertrain at the pace needed to
`capitalize on the rising regulatory requirements and global demand for
`EVs. We are at a distinct competitive advantage to capitalize on this
`growing demand. In fact, whereas other new EV entrants are forced to
`license key
`technologies and/or outsource primary engineering
`development to larger OEMs, we have already received significant
`OEM interest in our skateboard technology and our team’s expertise
`in platform engineering, powertrains and vehicle design, as is
`exemplified by the announcement of an agreement between us and
`Hyundai Motor Group for the co-development of a future EV
`platform based on our modular skateboard technology.
`Contract engineering opportunities serve as concrete points of external
`validation for our technology and the talent of our team, as well as
`provide additional sources of revenue and long-term commercial
`opportunities (such as skateboard and technology licensing) as the
`relationship matures. We are also in discussions with a number of
`other partners and expect to be in a position to announce many more
`partnerships in due course.
`34. Regarding Canoo’s subscription model, the Form S-1 stated, in relevant
`
`part:
`
`Subscription Offerings
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`Both our Lifestyle Vehicle and our Sport Vehicle are initially intended
`to be made available to consumers via an innovative subscription
`business model. Research from Volvo and the Harris Poll shows that
`74% of drivers believe EVs are the future of driving, but many are
`concerned about trying a new technology. 40% of non-EV drivers
`responded that a 30 day “try before you buy” period would increase the
`likelihood of them purchasing an EV. In other words, consumers are
`increasingly interested in EV technology, but long-term commitments
`(or other hurdles like sizable down payments) remain a significant
`barrier to entry. By reducing the commitment required for a typical
`car purchase or lease, we believe the subscription model will help
`reduce the barriers to entry for consumers looking to drive an EV,
`while also providing us with a distinct opportunity for recurring
`revenue and a unique profit margin profile. We believe this model is
`supported by a number of key trends in consumer preferences and
`strong underlying financial metrics as compared to a traditional one-
`time sale model.
`35. On January 25, 2021, Canoo filed its prospectus on Form 424b3 for the
`issuance of common stock upon the exercise of certain warrants, making
`substantially the same statements identified in ¶¶ 33-34.
`36. The above statements identified in ¶¶ 28-31, 33-35 were materially
`false and/or misleading, and failed to disclose material adverse facts about the
`Company’s business, operations, and prospects. Specifically, Defendants failed to
`disclose to investors: (1) that Canoo had decreased its focus on its plan to sell
`vehicles to consumers through a subscription model; (2) that Canoo would de-
`emphasize its engineering services business; (3) that, contrary to prior statements,
`Canoo did not have partnerships with original equipment manufacturers and no
`longer engaged in the previously announced partnership with Hyundai; and (4) that,
`as a result of the foregoing, Defendants’ positive statements about the Company’s
`business, operations, and prospects were materially misleading and/or lacked a
`reasonable basis.
`
`Disclosures at the End of the Class Period
`37. On March 29, 2021, after the market closed, Canoo held a conference
`call in connection with its fourth quarter 2020 financial results which were released
`the same day. During the call, defendant Aquila revealed that the Company would
`no longer focus on its engineering services line, stating:
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`CLASS ACTION COMPLAINT
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`Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 12 of 28 Page ID #:12
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`Due to the expansion of our derivatives and the best return on capital, it
`was decided by our Board to de-emphasize the originally stated
`contract engineering services line, and this will further accelerate the
`creation of IP and the launch of our derivatives which enhance our
`opportunity for the highest return on capital. Once this is complete, this
`will allow us to commercialize the three vehicles we have announced,
`our pickup truck, our multi-purpose delivery vehicle or MPDV1, and
`our lifestyle vehicle, all of which sit on our multi-purpose platform,
`which we call MPP1.
`38. The same day, the Company also announced that Paul Balciunas, who
`served as the Chief Financial Officer of Canoo following the close of the Merger,
`had resigned, effective April 2, 2021.
`39. Analysts were quick to point out that this contradicted the strategy
`touted in the SPAC merger. Analyst Craig Irwin from Roth Capital Partners stated,
`“So I would acknowledge that these are significant surprises on the call today, and
`that’s not ideal after a SPAC – the IPO process. So I just wanted to underline that.”
`He also asked: “[Y]ou talked about how engineering IP broadens your TAM [i.e.,
`total addressable market], but then you announced that you’re de-emphasizing your
`engineering services. Can you help us resolve that and maybe give us a little bit
`more color about why you would deemphasize engineering given that the original
`story was it would subsidize the development and broaden the partner opportunity
`with potentially multiple hats under license?” Defendant Aquila replied:
`I would say that from a Company perspective, it was a contradiction.
`It hasn’t been a contradiction from my statement. Look, as I overly -- as
`I said in the remarks, we look into this and it kind of goes us to your
`first question too with the talent war and everything. Just $25 million, it
`would yield us, we at the Board really feel like the best thing to do is to
`accelerate our derivatives and focus our talent on creating IP for the
`Company.
`You also have a lot of IP leakage when you do this work. And from my
`perspective, if I had been more involved earlier and certainly once I
`start, I invested and then took the Chairmanship, we started the
`analysis. I had concerns about this. If you study, (inaudible) you know,
`if you can find a partnership or something like that, it can make sense.
`And we’ll continue to look for things, but to be a contract engineering
`house is just really not going to drive the best shareholder value.
`40.
`In another exchange, defendant Aquila conceded that management had
`been “aggressive” in their prior statements:
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`CLASS ACTION COMPLAINT
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`Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 13 of 28 Page ID #:13
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`Steve Sakanos, Cronos Capital: [D]uring the course of the year, you
`stated a couple of times that you had under discussion with some
`OEMs and possibly the contract manufacturer. You said that there are
`going to be some announcements by the end of Q4. I’m just wondering
`what happened that changed all of that?
`Defendant Aquila: Right. So you’re again owning the past as much as
`the present in the future. Look, I can only speak to what I know about
`this. I think that they were focused on maybe a little more aggressive
`than I would be in their statements. I think more maturity of this
`team would not be that presumptuous. We only announced what is
`contracted. But year, I think they had the opportunities but they
`weren’t at our standard of representation to the public markets. . . .
`And then with respect to contract manufacturing, again we wouldn’t
`make an announcement. Again, this comes back to having an
`experienced public company here to be careful of the statements you
`make. So again, I think it was a little premature.
`41. Analysts also sought to determine what caused the change in strategy.
`Analyst John Murphy from Bank of America asked: “I mean, you tweak[ed] the
`business model a little bit. . . . Is there just too much opportunity on the commercial
`side, and you’re kind of putting that sort of back burner, or [is] the subscription
`model still in play?” Defendant Aquila explained that this was a better use of
`capital, i.e. there had not been a change in industry dynamics:
`So great question, John. So look, you know the industry well. If you
`think about a membership model, when I came in and took my role and
`we spent a lot of money analyzing the weight that this will have on the
`balance sheet. And I think to the point that Craig was talking about the
`changes, I mean, we wanted to bring in people who have a lot of
`experience on residual value, balance sheet management, and how to
`build a company at scale. And so you can only have a certain
`percentage of your business on membership. Otherwise, you’ve got a
`big cash hit that starts to develop on you as you can probably imagine.
`So we’ll be doing that on an appropriate basis.
`Had I’ve been here from day one, I can tell you I wouldn’t change
`anything on that MPP is its amazing design, which is why I
`compliment the engineering team incredible. What I have changed the
`sequence of tour pass [ph] and use cases I would go after based on my
`experience without a doubt, as you can see the modifications we’re
`doing.
`And to your point, when you really think about it on a financial
`burden basis on the balance sheet, yeah, there’s probably 80%
`change, but it’s too the mathematical positive. As far as the sequence
`of changing the things, we really on the top hat side, which is less right
`here in the 20% to 40% range.
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`CLASS ACTION COMPLAINT
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`Case 2:21-cv-02879-DSF-PVC Document 1 Filed 04/02/21 Page 14 of 28 Page ID #:14
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`So I like the model. I believe in the model. I know the model. It holds
`up mathematically and we’ll walk you through this. And again I
`apologize