Self-Driving Truck Company Sued After Going Public Via SPAC

Robert Manning, on behalf of Embark Technology, Inc. filed a complaint against Embark’s parent company Northern Genesis Acquisition (NGA), Embark’s parent company, as well as Embark’s and NGA’s boards of directors. He alleges that NGA and the individual defendants illegally manipulated their books so that NGA could maintain at least $5 million in equity as required by their charter.

As described in the filing, Embark began as a privately-held company working on autonomous driving technology for trucks. NGA is a special-purpose acquisition company (SPAC). SPACs are publicly traded shell companies that exist to acquire private companies, which they then take public, simplifying the initial public offering process. NGA, as is typical of SPACs, is required by their charter to maintain at least $5 million in net tangible assets.

Manning alleges that when NGA acquired Embark, they overleveraged themselves. NGA allegedly misclassified some of the stock they sold as part of the merger as permanent equity when it was in fact temporary equity. This allowed them to stay above their $5 million minimum. This purported manipulation further affected Embark’s stock price, which at its initial public offering, sold for $10 per share.

Manning further states that when the “error” came to light, the defendants underestimated how much this manipulation affected their previous filings, resulting in even further declines in Embark’s stock price. The complaint also alludes to securities fraud suits that Embark is having to fend off as a result of the aforementioned creative accounting. 

He seeks a pronouncement of the defendants’ wrongdoing as well as compensatory damages for Embark and reasonable accommodation for legal fees. He is represented by Magnanimo Dean Law, APC and Gainey McKenna & Egleston. The suit was brought in the Northern District of California, where Embark is incorporated and headquartered.