GRABAR LAW OFFICE INVESTIGATES POTENTIAL CLAIMS AGAINST OFFICERS AND DIRECTORS OF ROMEO POWER INC. (NYSE: RMO)
Have you held shares of Romeo Power Inc. (“Romeo” or the “Company”) (f/k/a RMG Acquisition Corp. (“RMG”)) since on or about October 5, 2020?
On June 2, 2022, A Federal Court determined that Defendants caused RMG to file public statements that contained misleading statements, including statements about Romeo’s committed contract revenue and supply chain for battery cells. These statements included a registration statement for Romeo on Form S-4 with the SEC which statement was amended on November 20, 2020, and December 4, 2020. Moreover, misleading statements were included the December 10, 2020, proxy statement, consent solicitation statement and prospectus with the SEC. The proxy statement solicited proxies to vote to approve the merger. Plaintiffs alleged and the Court agreed that the registration statement, proxy statement and prospectus contained misleading statements, including statements about Romeo’s committed contract revenue and supply chain for battery cells.
As noted in the Opinion of the Court:
Defendants maintain that the statements between October and December 2020 regarding the number of suppliers are not false because of other statements made by Romeo and Selwood. Selwood stated on October 5, 2020, “We have tested over 200 cells from ten suppliers, but have only qualified four cells to-date.” Romeo’s October 2020 Investor Presentation includes the logos of only LG Chem and Samsung under a heading that states “Cell Supplier Selection.” Romeo’s filings state that Samsung was “currently support[ing] the [Electric Vehicle] Program,” and do not include this statement for any other company. Defendants’ argument is unpersuasive. None of these statements provide any clarity to, or contradict, the concurrent statements in the filings that Murata and SK Innovation supply Romeo with battery cells.
The statements regarding Romeo’s suppliers do not fall within the PSLRA safe harbor for forward-looking statements. The PSLRA defines a “forward-looking statement” as “a statement containing a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items,” “any statement of the assumptions underlying or relating to any statement” of financial projections, and “any report issued by an outside reviewer retained by an issuer, to the extent that the report assesses a forward-looking statement made by the issuer.” 15 U.S.C. § 77z- 2(i)(1). The present-tense sentence that each of the four suppliers “supplies Romeo with power cells” is not a statement containing a projection nor is it a statement of assumptions underlying a projection.
The underlying class action complaint alleges that during the Class Period, unknown to investors, Romeo was suffering from an acute shortage of high quality battery cells, which are key raw materials for Romeo’s battery packs and modules, due to supply constraints. The Complaint further alleges that contrary to Defendants’ representations, (i) Romeo had only two battery cell suppliers, not four, (ii) the future potential risks that Defendants warned of concerning supply disruption or shortage had already occurred and were already negatively affecting Romeo’s business, operations and prospects, (iii) Romeo did not have the battery cell inventory to accommodate end-user demand and ramp up production in 2021, (iv) Romeo’s supply constraint was a material hindrance to Romeo’s revenue growth, and (v) Romeo’s supply chain for battery cells was not hedged, but in fact, was totally at risk and beholden to just two battery cell suppliers and the spot market for their 2021 inventory, and that Defendants failed to disclose these material facts to investors.
If you have held Romeo Power Inc. (NYSE: RMO) (“Romeo” or the “Company”) (f/k/a RMG Acquisition Corp. (“RMG”)) since on or about October 5, 2020, you can seek corporate reforms, the return of funds back to company coffers, and potentially a court approved incentive award if appropriate.
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