In the latest securities class action lawsuit to be filed against a post-SPAC-merger electric vehicle company, a plaintiff shareholder has filed a securities suit against the EV company Arrival SA, following the company’s announcement in November 2021 of a slowdown in its production schedule and of the company’s need to raise additional capital. As discussed below, the new lawsuit against Arrival has several characteristics in common with other SPAC-related securities suits that have been filed this year. A copy of the complaint that was filed against Arrival on December 22, 2021 can be found here.



Arrival (formerly Arrival Luxembourg) was founded in 2015 as a private company. CIIG Merger Corp. (CIIG) was a special purpose acquisition company (SPAC). CIIG completed an IPO in December 2019. On November 18, 2020, Arrival and CIIG announced a plan for the two companies to merge. The companies completed their business combination on March 24, 2021, with Arrival as the surviving company.


In the November 18, 2020 press release announcing the merger plans, and in subsequent public statements both before and after the merger, the company made a number of statements about it “game-changing technologies” that, the company claimed, allowed it to rapidly deploy and scale its “microfactories” with low expenditures. The company also claimed to have “signed contracts” with a significant order value, with planned vehicle production in Q4 2021. The company also claimed to have a United Parcel Service commitment to purchase 10,000 electric vans.


The subsequently filed securities complaint alleged that “through a series of disclosures” that began on November 8, 2021, “investors learned the truth.” On November 8,2021, the company announced larger than prior year losses; pulled its 2022 revenue goals; and “significantly scaled back its long-term projections, pushing its production and sales timeline into later time periods.” Specifically, the company had “revised its Microfactory rollout, and now expects significantly lower vehicle volumes and revenue in 2022,” adding that its “previous long-term forecasts from the merger should no longer be relied upon.” According to the subsequent complaint, the company’s share price dropped 24%.


The complaint adds that “unfortunately for investors,” the “bad news was not over.” On November 17, 2021, the company announced that it would be conducting significant capital raising transactions, including a round of convertible notes and a public offering of 25 million ordinary shares. From these disclosures, the complaint alleges, the “market learned that Arrival had burned through its capital resources at a much greater rate than disclosed, and as a result, was in a dire need for additional capital in order to finance its operations.” According to the complaint, the company’s shares dropped another 8% on this news.


The Lawsuit

On December 22, 2021, a plaintiff shareholder filed a securities class action lawsuit in the Southern District of New York against Arrival and certain of its directors and officers. As far as I can tell, none of the individuals named as defendants in the offering were directors or officers of the SPAC prior to the merger; all of the individuals appear to have associated only with Arrival prior to the merger. The complaint purports to be filed on behalf of investors who purchased shares of Arrival (or its predecessor in interest, the SPAC) between November 18, 2020 (the date the merger was announced) and November 19, 2021 (the date of the company’s last announcement about its planned financings).


The complaint alleges that during the class period, the defendants made false and/or misleading statements and/or failed to disclose that: “(i) the Company would record a substantially greater net loss and adjusted EBIDTA loss in the third quarter 2021 compared to the third quarter 2020; (ii) the Company would experience far greater capital and operational expense to operate and deploy its microfactories and manufacture EV vehicles than it had disclosed; (iii) the Company would not capitalize on or achieve profitability or provide meaningful revenue in the time periods disclosed; (iv) the Company would not achieve its disclosed production sales volumes; (v) the Company would not meet the disclosed production rollout deadlines. Accordingly, the Company materially overstated its financial and operational position and/or prospects, and (vi) as a result, the Company’s public statements were materially false and misleading at all times.”


The plaintiff alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the class.



By my count, this latest lawsuit is the 30th SPAC-related securities class action lawsuit to be filed in 2021 (representing about 14% of all securities suits filed this year), by comparison to only six in 2020. Like many of the SPAC-related suits filed in 2021, this complaint names as individual defendants only individuals associated with the operating company and the post-SPAC company; no former directors and officers of the SPAC were named. By my count, 11 of the 30 SPAC-related lawsuits filed this year similarly did not include any former directors or officers of the SPAC as named defendants.


This lawsuit is also similar to many of the other 2021 SPAC-related securities suits, in that it involves an electric vehicle company. EV companies that have merged with SPACs are a favored lawsuit target for the plaintiffs’ lawyers. By my count, nine of the 30 SPAC-related securities suits (slightly less than a third of all suits) filed in 2021 have involved companies in the EV industry.


There is one interesting detail in this complaint that is worth noting. And that is that the company’s expense issues arguably relate to supply chain and/or economic inflation issues. Among other things, in its November 8, 2021 earnings call in which the company revised much of its guidance, the company’s CFO specifically noted that part of the reason for the company’s departure from its prior plans was because the company was “experiencing price increases in certain raw materials, including aluminum and petrochemicals.” I suspect we will be seeing more of these kinds of disclosures making their way into securities class action complaints in the months ahead.


The one last thing I will say is that, as we head into the end of 2021 and the beginning of 2022, the SPAC-related securities litigation filing wave shows no signs that the filings are abating. All indications are that we will continue to see filings of these kinds of suits surge in 2022.