A proposed class action claims AppHarvest, Inc. made material misrepresentations and omissions regarding its business operations and prospects, and ultimately caused investors to suffer financial harm when the company reported a $32 million net loss in August 2021 and lowered its full year sales guidance.
The 26-page lawsuit claims AppHarvest, a sustainable food company that produces “nutritious, non-GMO” fruits and vegetables out of its applied technology greenhouses, and its CEO and CFO misrepresented or failed to disclose to investors that a lack of sufficient training and management for the company’s workforce would hinder it from consistently producing Grade No. 1 tomatoes and thus negatively impact AppHarvest’s financial results.
According to the suit, investors suffered financial losses when AppHarvest’s stock price dropped roughly 29 percent on August 11, 2021 after the company released less-than-rosy second quarter financial results and significantly lowered its full year sales guidance from a $20 million to $25 million range to a range of $7 million to $9 million.
The timeline covered by the lawsuit begins on October 9, 2020, when AppHarvest filed a registration statement and preliminary proxy statement/prospectus in connection with a reverse merger with special purpose acquisition company Novus Capital Corporation. Per the case, the registration statement highlighted, among other promising features of the surviving company, a “[s]trong and available local labor force” that would enable now-public AppHarvest to produce non-GMO fruits and vegetables free from chemical pesticides.
Over the following months, the defendants continued to tout the company’s progress, announcing that the first tomato crop had been planted and harvested at AppHarvest’s flagship Morehead, Kentucky facility, the lawsuit says. The parties stated in February 2021 that the company expected its 2021 fiscal year financial results to report net revenues of between $20 million to $25 million, the case relays.
It wasn’t until August 2021 that the defendants’ apparent misrepresentations and omissions were revealed, as the company reported on August 11 a $32 million loss for the second quarter 2021, the lawsuit says. Moreover, the defendants adjusted AppHarvest’s full year sales guidance to a range of $7 million to $9 million, according to the complaint.
The lawsuit says AppHarvest attributed the negative results to “operational headwinds with the ramp up to full production at the company’s first CEA facility, including labor and productivity challenges related to the training and development of the new workforce and historically low market prices for tomatoes.”
Upon this news, AppHarvest’s stock price dropped 29 percent on “unusually heavy trading volume,” thereby injuring investors financially, the suit attests.
The lawsuit looks to represent all persons or entities who purchased or otherwise acquired AppHarvest securities between October 9, 2020 and August 10, 2021 and were damaged thereby.
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