Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 1 of 31 Page ID #:1
`
`
`
`POMERANTZ LLP
`Jennifer Pafiti (SBN 282790)
`1100 Glendon Avenue, 15th Floor
`Los Angeles, CA 90024
`Telephone: 310-405-7190
`jpafiti@pomlaw.com
`
`Attorney for Plaintiff
`
`[Additional counsel on signature page]
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`
`
`Individually and on
`JEFF TYLER,
`Behalf of All Others Similarly Situated,
`
`
`
`
`Plaintiff,
`
`
` vs.
`
`CANOO INC., TONY AQUILA,
`ULRICH KRANZ, and PAUL
`BALCIUNAS,
`
`
`
`
`Case No.:
`
`CLASS ACTION
`
`CLASS ACTION COMPLAINT
`FOR VIOLATIONS OF THE
`FEDERAL SECURITIES LAWS
`
`
`JURY TRIAL DEMANDED
`
`
`Defendants.
`
`
`
`
`
`
`
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 2 of 31 Page ID #:2
`
`
`
`INTRODUCTION
`
`Plaintiff, by his undersigned attorneys, alleges upon personal knowledge as to
`
`himself and his own acts, and upon information and belief as to all other matters, based
`
`on the investigation conducted by and through Plaintiff’s attorneys, which included,
`
`among other things, a review of the public documents and announcements issued by
`
`Canoo Inc. (“Canoo” or the “Company”), filings with the U.S. Securities and Exchange
`
`Commission (“SEC”), wire and press releases published by and regarding the Company,
`
`securities analysts’ reports and advisories about the Company, and other information
`
`readily obtainable on the Internet.
`
`NATURE OF THE ACTION
`
`1.
`
`This is a federal class action brought individually and on behalf of all other
`
`persons and entities who purchased or otherwise acquired publicly-traded Canoo
`
`common stock and/or warrants from August 18, 2020, through and including March 29,
`
`2021, (the “Class Period”), seeking to recover damages pursuant to Sections 10(b) and
`
`20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§78j(b)
`
`and 78t(a), and Rule 10b-5 promulgated thereunder (the “Class”).
`
`JURISDICTION AND VENUE
`
`2.
`
`The claims alleged 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
`
`(17 C.F.R. § 240.10b-5).
`
`1
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 3 of 31 Page ID #:3
`
`
`
`3.
`
`This Court has jurisdiction over the subject matter of this action pursuant to
`
`Section 27 of the Exchange Act, 15 U.S.C. § 78aa and 28 U.S.C. § 1331.
`
`4.
`
`Venue is proper in this District pursuant to Section 27 of the Exchange Act,
`
`15 U.S.C. § 78aa, and 28 U.S.C. § 1391(b), as a substantial part of the acts events or
`
`omissions giving rise to the claims pleaded herein occurred in this District and
`
`defendants named herein maintain their residence or principal places of business in this
`
`District.
`
`5.
`
`In connection with the acts alleged in this complaint, Defendants, directly or
`
`indirectly, used the means and instrumentalities of interstate commerce, including, but
`
`not limited to, the United States mails, interstate telephone communications and the
`
`facilities of the NASDAQ National Securities Market (“NASDAQ”).
`
`PARTIES
`
`6.
`
`Plaintiff purchased shares of Canoo common stock, as set forth in the
`
`accompanying certification, which is incorporated by reference herein, and has been
`
`damaged thereby.
`
`7.
`
`Canoo (formerly known as Hennessy Capital Acquisition Corp. IV) is a
`
`Delaware corporation and maintains its principal executive offices in 19951 Mariner
`
`Avenue, Torrance, California. The Company was incorporated in Delaware on August
`
`6, 2018 and conducted its initial public offering in March 2019. The Company was
`
`formed for the purpose of effecting a business combination with specific focus on
`
`businesses in the industrial, technology and infrastructure sectors. Such companies are
`
`2
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 4 of 31 Page ID #:4
`
`
`referred to as “blank check” companies or special purpose acquisition companies
`
`(“SPACs”). In December 2020, the Company entered into a business combination with
`
`Canoo Holdings Limited (the “Business Combination”). The combined company
`
`purports to be a mobility technology company that develops electric vehicles (“EV”).
`
`The Company’s common stock and warrants are listed on the NASDAQ under the ticker
`
`symbol “GOEV” and “GOEVW,” respectively. Prior to December 22, 2020, the
`
`Company’s common stock and warrants traded under the symbols “HCAC” and
`
`“HCACW,” respectively.
`
`8.
`
`Defendant Ulrich Kranz (“Kranz”) served as Co-Founder and Chief
`
`Executive Officer (“CEO”) of Canoo Holdings Limited until he became the Company’s
`
`CEO, In Charge after the Business Combination.
`
`9.
`
`Defendant Paul Balciunas (“Balciunas”) served as Canoo Holdings
`
`Limited’s In Charge of Finance (CFO) & Corporate Development until he became Chief
`
`Financial Officer (“CFO”) In Charge of Finance after the Business Combination. On
`
`March 29, 2021, the Company announced that Balciunas would be resigning from the
`
`Company effective April 2, 2021. Balciunas signed the Company’s Annual Report for
`
`the fiscal year ended December 31, 2020 filed on Form 10-K with the SEC on March 31,
`
`2021 (“FY 2020 10-K”) as the Company’s “Principal Financial Officer and Principal
`
`Accounting Officer.”
`
`3
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 5 of 31 Page ID #:5
`
`
`
`10. Defendant Anthony (Tony) Aquila (“Aquila”) began serving as Executive
`
`Chairman and Director after the Business Combination. Aquila signed the FY 2020 10-
`
`K as the Company’s “Principal Executive Officer.”
`
`11. Defendants Kranz, Balciunas and Aquila are collectively referred to herein
`
`as the “Individual Defendants.”
`
`12. The Individual Defendants, because of their positions with the Company,
`
`controlled and/or possessed the authority to control the contents of its reports, press
`
`releases and presentations to securities analysts and through them, to the investing
`
`public. By reason of their management positions and their ability to make public
`
`statements in the name of Canoo, the Individual Defendants were and are controlling
`
`persons, and had the power and influence to cause (and did cause) Canoo to engage in
`
`the conduct complained of herein.
`
`CLASS ACTION ALLEGATIONS
`
`13. Plaintiff brings this action as a class action pursuant to Rules 23(a) and
`
`(b)(3) of the Federal Rules of Civil Procedure on behalf of all those who purchased or
`
`otherwise acquired publicly traded Canoo common stock and/or warrants from August
`
`18, 2020, through and including March 29, 2021. Excluded from the Class are
`
`Defendants herein, members of the immediate family of each of the Defendants, any
`
`person, firm, trust, corporation, officer, director or other individual or entity in which
`
`any Defendant has a controlling interest or which is related to or affiliated with any of
`
`4
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 6 of 31 Page ID #:6
`
`
`the Defendants, and the legal representatives, agents, affiliates, heirs, successors-in-
`
`interest or assigns of any such excluded party.
`
`14. The members of the Class are located in geographically diverse areas and
`
`are so numerous that joinder of all members is impracticable. Throughout the Class
`
`Period, Canoo common stock and warrants were actively traded on the NASDAQ.
`
`Although the exact number of Class members is unknown at this time and can only be
`
`ascertained through appropriate discovery, Plaintiff believes there are thousands of
`
`members of the Class who traded the Company’s common stock and warrants during the
`
`Class Period.
`
`15. Common questions of law and fact exist as to all members of the Class and
`
`predominate over any questions affecting solely individual members of the Class.
`
`Among the questions of law and fact common to the Class are:
`
`(a) Whether Defendants violated federal securities laws based upon the
`
`facts alleged herein;
`
`(b) Whether statements made by Defendants to the investing public
`
`during the Class Period misrepresented material facts about the
`
`business, operations and management;
`
`(c) Whether the Individual Defendants caused Canoo to issue false and
`
`misleading statements during the Class Period;
`
`(d) Whether Defendants acted knowingly or recklessly in issuing false
`
`and misleading statements;
`
`5
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 7 of 31 Page ID #:7
`
`
`
`(e) Whether the prices of Canoo common stock and warrants during the
`
`Class Period were artificially inflated because of the Defendants’
`
`conduct complained of herein; and
`
`(f) Whether the members of the Class have sustained damages and, if so,
`
`the proper measure of damages.
`
`16. Plaintiff’s claims are typical of the claims of the members of the Class as
`
`Plaintiff and members of the Class sustained damages arising out of Defendants’
`
`wrongful conduct in violation of federal laws as complained of herein.
`
`17. Plaintiff will fairly and adequately protect the interests of the members of
`
`the Class and has retained counsel competent and experienced in class and securities
`
`litigation. Plaintiff has no interests antagonistic to, or in conflict with, those of the Class.
`
`18. A class action is superior to alternative methods for the fair and efficient
`
`adjudication of this controversy since joinder of all members of this Class is
`
`impracticable. Furthermore, because the damages suffered by individual Class members
`
`may be relatively small, the expense and burden of individual litigation make it
`
`impossible for the Class members individually to redress the wrongs done to them.
`
`There will be no difficulty in the management of this action as a class action.
`
`19. Plaintiff will rely, in part, upon the presumption of reliance established by
`
`the fraud-on-the-market doctrine in that:
`
`(a) Defendants made public misrepresentations or failed to disclose
`material facts during the Class Period;
`
`
`6
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 8 of 31 Page ID #:8
`
`
`
`(b)
`
`(d)
`
`the omissions and misrepresentations were material;
`
`(c) Canoo common stock and warrants are traded in an efficient market;
`
`the Company’s shares were liquid and traded with moderate to heavy
`volume during the Class Period;
`
`the Company traded on the NASDAQ and was covered by multiple
`analysts;
`
`the misrepresentations and omissions alleged would tend to induce a
`reasonable investor to misjudge the value of the Company’s
`securities; and
`
`Plaintiff and members of the Class purchased, acquired and/or sold
`Canoo securities between the time the Defendants failed to disclose
`or misrepresented material facts and the time the true facts were
`disclosed, without knowledge of the omitted or misrepresented facts.
`
`20. Based upon the foregoing, Plaintiff and the members of the Class are
`
`(e)
`
`(f)
`
`(g)
`
`entitled to a presumption of reliance upon the integrity of the market.
`
`MATERIALLY FALSE & MISLEADING STATEMENTS
`
`21. The Class Period begins on August 18, 2020. On August 18, 2020, the
`
`Company issued a press release announcing that it had entered into a deal with Canoo
`
`Holdings Ltd. which would result in it becoming a publicly listed company.
`
`22. During an August 18, 2020 conference call with investors, Defendant Kranz
`
`touted three streams of revenue for the Company. In addition to business to business
`
`(“B2B”) sales, the Company touted its engineering services business and a subscription-
`
`based consumer vehicle service business:
`
`We have three phases of revenue streams. In the first phase, we call it
`Engineering Services. This is a phase that already exists today. So, we
`
`7
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 9 of 31 Page ID #:9
`
`
`
`are working for companies and we are already making money with the
`first revenue stream. The second revenue stream is a B2C. This is a stream
`that we will have available when we launch our first vehicle, our lifestyle
`vehicle, by 2022. This is a consumer vehicle and it will be on
`subscription. The B2B service, that you see on the right side, is our third
`revenue stream. This will be a vehicle introduced in 2023, what we call a
`last-mile delivery vehicle, and this will be for sales. Three different revenue
`streams give us very good flexibility, and it makes also sure that we can
`really tap into different areas to be profitable.
`
`23.
`
`In a presentation filed with the SEC on August 18, 2020, the Company
`
`described these streams of revenue as follows:
`
`
`
`
`
`
`
`
`
`
`
`24.
`
`In another slide the Company touted how its engineering services revenue
`
`would “reduce the Company’s overall execution risk”:
`
`
`
`8
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 10 of 31 Page ID #:10
`
`
`
`
`
`
`
`
`25. Also, during the August 18, 2020 conference call, Defendant Balciunas
`
`touted the subscription-based business model:
`
`Looking at our margin, our target rate is approximately 40% for the
`subscription business. As we look at other competitors that offer
`subscription products in the technology sector, we see that this margin is
`very similar and there’s a lot of similarities between our model and their
`model, even though at initial glance it may appear to be very different.…
`Because depreciation is such a fundamental part of our business, think about
`it like a rental car business, for us to be able to achieve a 20% operating
`profit is far greater than what you see in the traditional automotive
`OEM business model where that margin is closer to 5% to 10%. So, it
`really does highlight the power of a subscription business model with
`this figure being a fully-burdened margin.
`
`26. The presentation highlighted how the subscription model was superior to
`
`leasing:
`
`9
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 11 of 31 Page ID #:11
`
`
`
`
`
`
`
`
`27. The presentation further touted how the subscription-based model would be
`
`“more profitable & resilient”:
`
`
`
`
`
`
`
`
`
`10
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 12 of 31 Page ID #:12
`
`
`
`28. On December 21, 2020, Company announced its business combination with
`
`Canoo Holdings Ltd. had been completed and that the combined company’s common
`
`stock and warrants would trade on the NASDAQ beginning on December 22, 2020.
`
`29. On December 21, 2020, after the market closed, the Company filed a Form
`
`8-K with the SEC signed by Defendant Balciunas. The Form 8-K included a press
`
`release touting the combination and the Company’s “unique business model”:
`
`Canoo is a Los Angeles-based company that has developed breakthrough
`electric vehicles that are reinventing the automotive landscape with bold
`innovations in design, pioneering technologies, and a unique business
`model that defies traditional ownership to put customers first.
`
`30. On January 13, 2021, after the market closed, the Company filed a Form 8-
`
`K with the SEC with a press release announcing the Company’s new Board of Directors.
`
`Defendant Balciunas signed the Form 8-K. Again, the Form 8-K included a press
`
`release in which the Company touted its “unique business model”:
`
`Canoo is a Los Angeles-based company that has developed breakthrough
`electric vehicles that are reinventing the automotive landscape with bold
`innovations in design, pioneering technologies, and a unique business
`model that defies traditional ownership to put customers first.
`
`31. A Form S-1 Registration Statement was filed on January 13, 2021 and
`
`signed by Defendants Aquila and Balciunas (the “S-1”).
`
`32.
`
`In the S-1, the Company touted the value of its EV engineering experience,
`
`its deal with Hyundai to provide engineering services, and discussions with other
`
`industry participants:
`
`This experience and advanced progress have garnered the attention of
`prospective collaboration partners, including leading global automotive
`
`11
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 13 of 31 Page ID #:13
`
`OEMs. In February 2020, we entered into an agreement with Hyundai
`Motor Group to co-develop a future EV platform based on our modular and
`scalable skateboard technology, providing further validation of our technical
`leadership. The agreement provides for the co-development of a platform for
`a small segment electric vehicle for which the intellectual property
`developed will be jointly owned by us and Hyundai Motor Group. The
`agreement provides that it may be terminated for convenience by either
`party; however, certain provisions, including with respect to the joint-
`ownership of intellectual property, survive any such termination. We are
`also currently in discussions with multiple other blue-chip industry
`participants interested in leveraging our technologies and engineering
`expertise for their own commercial products.
`
`33. The S-1 also stated:
`
`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. The S-1 further touted its “innovative” business model:
`
`Both our Lifestyle Vehicle and our Sport Vehicle are initially intended to be
`made available to consumers via an innovative subscription business
`
`12
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 14 of 31 Page ID #:14
`
`model. With a single monthly payment, customers will enjoy the benefits of
`an all-inclusive experience that, in addition to their own vehicle, also
`includes standard maintenance, warranty, registration and access to both
`insurance and vehicle charging. We plan to utilize an asset-light, flexible
`manufacturing strategy by outsourcing our direct vehicle production
`operations to a world-class vehicle contract manufacturing partner for our
`initial vehicle programs. In doing so, we will significantly reduce our up-
`front capital investment and eliminate the recurring fixed costs and overhead
`that would be required for us to own and operate our own assembly facility.
`
`35. The S-1 further stated:
`
`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.
`
`* * *
`
`During 2020, our revenue has been derived from the provision of
`engineering, development and design consulting services on a project basis.
`Once we reach commercialization and commence production of our EVs, we
`expect that the significant majority of our revenue will be derived from
`our consumer subscription program for our Lifestyle Vehicle and Sport
`Vehicle, as well as sales of our Multi-Purpose Delivery Vehicle.
`
`13
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 15 of 31 Page ID #:15
`
`
`
`36. On March 11, 2021, the Company filed a Form 8-K signed by Defendant
`
`Balciunas with an attached press release dated March 10, 2021 announcing the debut of a
`
`fully-electric pickup truck. The press release further again touted its business model:
`
`Canoo is a Los Angeles-based company that has developed breakthrough
`electric vehicles that are reinventing the automotive landscape with bold
`innovations in design, pioneering technologies, and a unique business
`model that defies traditional ownership to put customers first.
`
`37. On March 15, 2021, the Company filed a Form 8-K signed by Defendant
`
`Balciunas with an attached press release dated March 15, 2021 in which the Company
`
`touted its “unique business model”:
`
`Canoo is a Los Angeles-based company that has developed breakthrough
`electric vehicles that are reinventing the automotive landscape with bold
`innovations in design, pioneering technologies, and a unique business
`model that defies traditional ownership to put customers first.
`
`38. The statements described above were materially false and misleading and
`
`failed to disclose material adverse facts about the Company’s business, operations, and
`
`prospects. As discussed below, the Defendants misled investors by misrepresenting
`
`and/or failing to disclose that: (i) the Company’s engineering services was not a viable
`
`business, would not provide meaningful revenue in 2021, and would not reduce
`
`operational risk; (ii) that the Company would no longer be focused on its subscription-
`
`based business model; and (iii) as a result, the Company’s public statements were
`
`materially false and misleading at all relevant times.
`
`14
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 16 of 31 Page ID #:16
`
`
`
`THE TRUTH EMERGES
`
`39. On March 29, 2021, after the market closed, Canoo issued a press release
`
`(“Q4 Release”) reporting its fourth quarter and full year 2020 results. The Q4 Release
`
`removed the language touting its “unique business model” simply stating: “Canoo has
`
`developed breakthrough electric vehicles that are reinventing the automotive landscape
`
`with bold innovations in design and pioneering technologies.”
`
`40. On March 29, 2021, the Company held a conference call to discuss its
`
`financial results (the “Q4 Call”). During the call Defendant Aquila announced that
`
`Defendant Balciunas was being replaced as CFO. The Company’s CEO, Defendant
`
`Kranz, was not on the call.
`
`41. During the Q4 Call, Defendant Aquila revealed that “it was decided by our
`
`Board to de-emphasize the originally stated contract engineering services line.”
`
`42. An analyst from ROTH Capital stated during the Q4 Call, “I would
`
`acknowledge that these are significant surprises on the call today, and that’s not ideal
`
`after a SPAC – the IPO process” and asked why the Company “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…. [C]ontract engineering house is just really not going to drive the best
`
`shareholder value.”
`
`15
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 17 of 31 Page ID #:17
`
`
`
`43. Another analyst inquired: “[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 manufacturers. You said that there are going to be some announcements by the
`
`end of Q4. I’m just wondering what happened that changed all that?” To which,
`
`Defendant Aquila responded:
`
`I think that [other Canoo management] 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 yes, 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 team here to be
`careful of the statements you make. So again, I think it was a little premature
`deal.
`
`44. Regarding the subscription model, another analyst asked, “I mean you’ve
`
`tweaked the business model a little bit. But I mean, just curious on the sort of retail to the
`
`consumer side, how you’re thinking about that going forward? Is there just too much
`
`opportunity on the commercial side and you’re kind of putting that sort of back burner or
`
`is this subscription model still in play? Because I know that was part of the story before.”
`
`To which Defendant Aquila responded:
`
`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…. [S]o 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…. [A]s 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, yes there’s probably 80% change but it’s too [SIC] that
`mathematical positive. As far as the sequence of changing the things we’re
`really on the top hat side, which is less right here in the 20% to 40% range.
`16
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`29
`
`30
`
`31
`
`32
`
`

`

`Case 2:21-cv-03080-FMO-JPR Document 1 Filed 04/09/21 Page 18 of 31 Page ID #:18
`
`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 to
`anybody. As a leader, you always own the past before the present or the
`future. And so I take everyone's comments in all the three categories
`
`45. An article published by The Verge shortly after the call reported:
`
`The deal between Canoo and Hyundai to build electric vehicles appears
`to be dead, as the California EV startup is moving away from trying to
`sell its electric vehicle technology to other automakers.
`
`Canoo chairman Tony Aquila shared the news Monday during an icy
`investor call―Canoo’s first as a publicly-traded company. Canoo’s CEO
`was also absent from the call, and the company announced earlier in the
`day that its CFO had resigned to take another job—the second major
`departure in recent weeks following Canoo losing its head of corporate
`strategy.
`
`* * *
`
`“These are significant surprises on the call today, and that’s not ideal,” Roth
`Capital analyst Craig Irwin said at one point on the call.
`
`The deal with Hyundai was announced in February 2020, and it was
`supposed to result in both the Hyundai and Kia brands building vehicles on
`Canoo’s electric vehicle platform. It was seen as a major vote of confidence
`in the startup, which was just two years old at the time, as well as its tech.
`Canoo called it a “key partnership.” Hyundai did not immediately respond to
`a request for comment. Canoo did not respond beyond Aquila’s statements.
`
`* * *
`
`In documents filed with the Securities and Exchange Commission, both
`before and after the merger, Canoo had said its planned engineering services
`business presented “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.”
`
`* * *
`
`But on Monday, Aquila said Canoo will now focus more on making and
`selling its own vehicles to commercial operators. The company has so far
`announced a delivery vehicle, a pickup truck, and a van, all of which are
`17
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITI