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(Reuters) -The U.S. Securities and Exchange Commission sued two former executives of electric vehicle company Canoo Inc on Friday over what the regulator alleges were reporting failures related to hundreds of millions of dollars of unreasonable revenue projections.
In the complaint filed in Los Angeles federal court, the SEC said Ulrich Kranz, the company’s former chief executive, and Paul Balciunas, its former chief financial officer, misled investors about the company’s financial prospects before it went public in a merger with a special purpose acquisition company in December 2020.
In the run-up to the deal, Canoo had projected revenue of $120 million in 2021 and $250 million in 2022 based on deals to provide engineering services to other companies. The SEC said Kranz and Balciunas knew before the merger that the projects were unlikely to generate revenue.
The carmaker’s stock plunged 21% after it announced in March 2021 that it would not achieve the anticipated revenue, the SEC said.
The regulator also alleged that Kranz failed to disclose more than $900,000 in compensation he received from two Canoo investors in October 2020 to stay with the company.
Attorneys representing Kranz and Balciunas in a shareholder lawsuit over the revenue projections did not immediately reply to requests for comment.
Canoo said in May that it had tentatively agreed to pay a $1.5 million penalty to settle with the SEC
A spokesperson for the company did not immediately reply to a request for comment on Friday.
The Texas-based company warned investors in May that it might not be able to meet its financial obligations, saying it had access to $600 million in funding but added it had “substantial doubt” about continuing as a going concern.
The carmaker is scheduled to report its second quarter results on Aug. 14.
