A U.K. company that makes electric and hydrogen electric trucks is threatening to sue ElectraMeccanica (Nasdaq:SOLO) for $75 million for withdrawing from a proposed merger.
ElectraMeccanica, which also makes electric vehicles, was founded in B.C. and is still legally domiciled in B.C., though it is in the process of moving to the U.S.
In August, the company announced a merger with Tevva.
Under the terms of the deal, ElectraMeccanica shareholders would own 23.5 per cent of the newly merged company, which would be known as Tevva, and current Tevva shareholders would own 76.5 per cent, on a fully diluted basis.
But ElectraMeccanica decided to back out of the deal in early October, citing “multiple incurable breaches of the agreement by Tevva, including failures by Tevva to disclose to ElectraMeccanica material information about Tevva.”
In an Oct. 4 press release, ElectraMeccanica noted that, since announcing the merger, the company’s stock had fallen 34 per cent.
Tevva is now threatening to sue.
The U.K. company has filed an action in a District Court in Arizona against ElectraMeccanica Vehicles Corp. and its CEO, Susan Docherty.
It seeks “redress for the improper and unmerited purported termination of the binding merger arrangement agreement with Tevva.”
It also seeks to block any other alternative merger ElectraMeccanica might have in mind with some other company.
However, Tevva is giving ElectraMeccanica time to reconsider its withdrawal from the merger.
“Tevva has chosen to exercise restraint by giving EMV until November 17, 2023, to reach an acceptable solution to this situation,” Tevva says in its press release.
Tevva says the lawsuit “exposes how EMV offered spurious, defamatory allegations in a thinly-veiled attempt to justify its abrupt termination of a binding merger agreement with Tevva – a merger agreement that was the product of thousands of hours of time spent by both parties evaluating and structuring a mutually beneficial business combination.”
In its suit, Tevva is seeking $75 million in damages, an injunction blocking ElectraMeccanica from entering alternative merger deals with other companies, and a protective order preventing ElectraMeccanica from disbursing cash through dividends, executive compensation, “and similar wasteful actions.”
Asked to comment on the lawsuit, ElectraMeccanica said it doesn't comment on litigation.
