November 21, 2021
Grant & Eisenhofer PA and Cohen Milstein Sellers & Toll PLLC have agreed to a stipulation that would consolidate two lawsuits filed in Delaware Chancery Court over a $1 billion merger that created XL Fleet Corp., and are seeking to serve as co-lead counsel for the proposed shareholder class.
In a stipulation and proposed order filed with Chancellor Kathaleen S. McCormick on Tuesday, the two firms said they “agree that the related actions involve the same subject matter and [the] same common questions of law and fact and that the administration of justice will be served by consolidating the related actions.” The chancellor had yet to sign off on the proposed order as of early Wednesday afternoon.
In September, investor Cody Laidlaw filed a proposed class action, alleging that directors of the special purpose acquisition company Pivotal Investment Corp. II pushed for the December merger with Boston-based startup XL Hybrids Inc., which manufacturers systems to convert combustion engines into electric hybrids, even though they knew it was bad for shareholders.
Laidlaw asserted that insiders drove an unfair “value-destroying” deal process that misled shareholders. He sued the company and a raft of its former or current officers and directors, including former Pivotal Chairman and CEO Jonathan J. Ledecky. Ledecky remained on XL Fleet’s post-merger board, the complaint said.
Created for the purposes of doing a deal, Pivotal raised $230 million in an initial public offering in July 2019 with promises it would return investors’ cash with interest if it failed to find an acquisition target within 18 months, the complaint said.
But Pivotal’s founders and controlling shareholders, whose founders’ shares had no redemption rights, would have lost their investment if the company was liquidated, the complaint said.
Motivated to strike a deal, officers failed to disclose they had family ties with XL Hybrids, and didn’t tell Class A shareholders how the deal would dilute the value of their shares, the complaint alleges. The officers also failed to disclose that Pivotal would contribute under $7 per share to the merger, even though public investors had paid $10 per share, according to the complaint.
The company’s per-share price dropped to a low of $5.41 within months of the merger. Pivotal stockholders would have gotten $10.09 per share if it had liquidated rather than merged, Laidlaw’s complaint said.