The cascade of consequences that followed in the aftermath of the recent Coldplay Concert scandal, in which Andy Byron, the CEO of Astronomy, was caught on Kiss-Cam embracing a woman not his wife (and who was at the time also an executive at the same company), represents a very high-profile example of the complications that can arise from the public conduct or misconduct of a company’s CEO. These problems are all magnified when the CEO involved is synonymous with the company they lead. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, takes a look at a recently filed securities class action lawsuit that followed in the wake of a company’s announcement that its CEO was departing after a conduct and ethics investigation. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a proposed guest post. Here is Sarah’s article.
********************
Many companies have CEOs who are synonymous with the companies they lead. While often they are considered brilliant minds, their public statements and unconventional behavior can impact corporate boards and shareholders. A recently filed securities lawsuit against a lidar technology company after it announced its founder and CEO was stepping down after a conduct and ethics investigation highlights the risk when the face of the company exits, including follow-on securities litigation.
Background
Luminar Technologies Inc. (Luminar) develops vision-based lidar (light detection and ranging) and machine perception technologies, primarily for self-driving cars. It was founded in 2012 by Austin Russell (Russell), who was 17 at the time. Russell worked to develop lidar with improved resolution and rangeby having Luminar construct many components in-house. In 2013, Russell dropped out of Stanford after three months when he was awarded the Thiel Fellowship, which offers students aged 22 and younger a total of $200,000 over two years to drop out of school and pursue other work, with guidance and support. Luminar spent its first five years in stealth mode and, in April 2017, unveiled its advanced lidar sensor system.
In May 2020, Volvo announced a self-driving highway feature, “Highway Pilot”, would be powered by Luminar’s third-generation Iris lidar. On August 24, 2020, Luminar announced it was going public through a special-purpose acquisition company (SPAC) with Gores Metropoulos, with its shares listed on NASDAQ. In addition to the $400 million cash infusion from Gores Metropoulos, $170 million in additional capital came from Peter Thiel, the Volvo Cars Tech Fund, and others. On December 3, 2020, Luminar went public, trading as LAZR with an estimated market cap at $3.4 billion. After the IPO Russell retained 83% of the company’s voting power and took on the role of chairman.
Through the early 2020s, Luminar secured investments and deals with Daimler Trucks and Intel’s Mobileye, while launching Sentinel, a lidar + software driving system, in collaboration with Volvo. In November 2021, Luminar announced its partnership with Nvidia to support the commercial availability of autonomous vehicle capabilities by 2024. In January 2022, Mercedes-Benz announced Luminar would supply the lidar systems for future models of their vehicles, including auto assist and full self-driving systems. Luminar’s revenue grew in 2022 to $40.7M (up from $32M in 2021) and it joined the Russell 2000 index.
In the Spring of 2024 Luminar-supported Volvo EX90 entered series production. Luminar also announced a 20% reduction in force in 2024 due to consistently operating at a loss, which resulted in a declining stock price. Relevant to the Luminar SCA, on March 28, 2025, Luminar filed its Form 10-K for the period ended December 31, 2024, which stated in part:
We are highly dependent on Austin Russell, our Founder, President and Chief Executive Officer. Mr. Russell created our first LiDAR product and he remains deeply involved in all aspects of our business, including product development. The loss of Mr. Russell would adversely affect our business because his loss could make it more difficult to, among other things, compete with other market participants, manage our R&D activities, and retain existing customers or cultivate new ones. Negative public perception of, or negative news related to, Mr. Russell may also adversely affect our brand, relationships with customers, or standing in the industry.
On May 14, 2025, after the market close, and approximately 30 minutes after Luminar issued the 1Q25 Press Release, the Company issued a second press release announcing that Defendant Russell had resigned as President and CEO of the Company and as the Chairman of the Board, “effective immediately, following a Code of Business Conduct and Ethics inquiry by the Audit Committee of the Board of Directors.” The second press release further states “[t]his matter does not impact any of the Company’s financial results. Mr. Russell will remain on the Board and be available to the incoming Chief Executive Officer on transition and technology matters.”
On May 15, 2025, J.P. Morgan investment analysts issued a report downgrading Luminar stock, citing Russell’s departure as their rationale. Also on May 21, 2025, BofA analysts provided a final investment opinion after terminating coverage of Luminar which indicated that Russell’s departure could adversely impact Luminar’s ability to innovate.
The Lawsuit
On July 23, 2025, a plaintiff shareholder filed a securities class action lawsuit in the United States District Court Middle District of Florida against Luminar, Russelll and Luminar’s CFO. The complaint purports to be filed on behalf of investors who purchased the company’s securities between March 20, 2025, and May 14, 2025. A copy of the complaint can be found here.
The complaint alleges that during the class period, the defendants (i) employed devices, schemes, and artifices to defraud; (ii) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (iii) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Company’s securities to maintain artificially high market prices for Luminar’s securities.
The plaintiff alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the class.
Discussion
The meteoric ascent of Russell, as a young innovator and CEO of a company synonymous with him, may sound like a familiar risk to D&O underwriters. Particularly when the company’s 10K explicitly states that “Negative public perception of, or negative news related to, Mr. Russell may also adversely affect our brand, relationships with customers, or standing in the industry.” It is thus not entirely surprising that when Mr. Russell stepped down after an inquiry by the board’s code of business conduct and ethics that a 10(b) securities class action was filed shortly thereafter. Despite the press release announcing Mr. Russell’s departure indicating that it would not impact the company’s financial results, without knowing the reason for Mr. Russell’s exit, that statement seems a bit premature.
As D&O Diary readers are aware, it is not uncommon for shareholder derivative and securities class actions to be filed against publicly traded companies when CEOs synonymous with a company step down. Particularly when leadership’s exit may be tied to something solacious. While the reason for Russell stepping down has not come out yet, it should be noted that Luminar, as always been operating at a deficit, with debt in 2023 calculated to be $1.3 billion. In addition, the Luminar stock dropped in 2024 after a 20% reduction in force was announced.
Thus, while the lidar technology that Russell has developed is certainly impressive, even more so given his age at Luminar’s creation, it will be interesting to see the purported shareholder damages for the alleged class period. What may be more harmful, for Luminar and potentially greater society, is the loss of Russell as the brains behind the operation.
The views expressed in this article are exclusively those of the author, and all of the content in this article has been created solely in the author’s individual capacity. This article is not affiliated with her company, colleagues, or clients. The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.