COLUMBUS, Ohio (AP) is an Appalachian high-tech agricultural company that J.
The shareholder lawsuits against Morehead, Kentucky-based AppHarvest were filed between November 2021 and August 2022 by individual investors and the county's pension association. They claim the agriculture startup, where Vance, a Republican U.S. Senate candidate from Ohio, also briefly served on the board, has consistently increased hiring and retention, according to Securities and Exchange Commission filings. and US Exchanges used by investors. companies. The lawsuits also allege that investors were misled by press releases, analyst presentations and other public statements, including a statement from the company's CEO in an interview with The Associated Press touting the recruitment.
Such lawsuits were not unexpected given the recent decline in AppHarvest's public stock price. Since last year, the incentive and stock-purchase programs that Vance and other AppHarvest executives created for the company's workforce, mostly in Appalachia, have lost hundreds of millions of dollars in value. Ohio teachers also lost more than $100,000 in retirement savings in the AppHarvest fiasco before the Ohio pension system sold 16,000 of its shares in June.
Still, the lawsuits could raise further questions about one of Vance's main campaign narratives: that the "Highland Elegy" author left a lucrative business career in San Francisco's tech world to focus on revitalizing the state of his native Appalachian Mountains. Some of these efforts have already come under scrutiny. For example, in a region ravaged by opioid addiction, he criticized a drug charity for hiring a doctor with ties to a big pharmaceutical company. Vance's company said it was unaware of those connections.
AppHarvest said the claims are baseless. Vance, the Republican candidate for a key U.S. Senate seat in Ohio, is not named in any of the lawsuits. He left AppHarvest in April 2021 before announcing his Senate campaign.
Vance's company said his Cincinnati-based firm, Narya Capital, is itself an investor in AppHarvest and would suffer if the claims in the lawsuit are upheld. Taylor Van Kirk, a spokeswoman, also emphasized that all of the lawsuits were filed after Vance left the board.
Colin Greenspan, co-founder and managing partner of Narya, from which Vance is on "partial leave," said the company continues to support AppHarvest.
"We believe AppHarvest is transforming America's food supply in a way that will impact generations to come, " he said in a statement.
Vance will face Democratic Representative Tim Ryan in one of the Senate's most competitive races. He has been promoting AppHarvest since at least 2020 during the coronavirus pandemic.
The company grows tomatoes and other fruits and vegetables using sustainable farming practices on the world's largest high-tech indoor farms, according to its website. In SEC filings, it describes its mission as empowering Appalachians, promoting positive environmental change in agriculture and improving the lives of its employees and the community.
"Over the past few months, we've learned that our food system is a little more fragile than we thought, " Vance said in an August 2020 article for Greenhouse Grower. "AppHarvest will change that, and it will do so by building a strong, sustainable business in Appalachia and investing in the people who call it home."
The lawsuits alleging misrepresentation date back to January 2021, saying the training AppHarvest provided to workers was a "joke," that its workforce "suffered massive layoffs, layoffs, and absenteeism due to COVID-19, which negatively affected productivity". His first year was "damaged due to operational problems" and 50% of the crop was lost. The lawsuits variously seek unspecified monetary damages, management reforms and greater transparency from AppHarvest, and in two cases jury trials.
AppHarvest's lawyers refused.
"This case is a textual example of a plaintiff attempting to turn a company's lack of annual revenue into a violation of the federal securities laws," they said in the U.S. District Court for the Southern District of New York last month. . “However, these laws and related standards prohibit retroactive recognition of fraud. And for good reasons. Markets are complex and financial projections made months or even a year in advance, especially for a newly public company like AppHarvest, are always uncertain.”
It is unclear how involved Vance was with the company while he was a director. He was on a list of celebrities, including media mogul Martha Stewart, who supported AppHarvest from the start and spoke positively about the company on Fox Business News on February 1, 2021, which closed its stock on the day of the release. merger with Novus Capital, a specialized acquisitions company, or SPAC.
"We saw an opportunity here in that you can use technology, bring the point of production closer to the end consumer, you can pay people a living wage, you can build a company that investors and consumers can be proud of, but you can have only the best products.” he said.
Naria was an investor in the merger and said he owned 2.9 million shares of AppHarvest at the time, shares that were previously valued at $24.95 a share, or $73 million, nine days after the announcement. $36 a piece. share, or nearly $106 million. AppHarvest shares closed Thursday at $1.57 a share, and Naria said he still owns all of his shares.
Matt Sheridan, senior professor of finance at Ohio State University's Fisher College of Business, said the merger involving SPACs, also known as shell companies, is "a bad deal for investors" whose shares in the group fell. with 70%. They offer an alternative to the traditional initial public offering, or IPO, to take a company public, with fewer hurdles and less transparency.
A month after AppHarvest went public, the SEC warned investors not to invest in a SPAC "just because someone who knows the backer invests in it or says it's a good investment." Investment vehicles are now subject to new regulatory oversight.
"Anytime you have a collapse like that, it's concerning, " Sheridan said. "And if there were misleading statements, false statements, then that could lead to litigation."
Darla Turner, spokeswoman for AppHarvest, said the lawsuits are unfounded and that the company is thriving. He said he plans to quadruple the farm network by the end of the year, adding locations specializing in salad greens and berries. AppHarvest is living wage certified and offers a sustainable employee benefits program, Turner said.
Vance resigned from AppHarvest's board of directors two months after it was announced on April 9, 2021 that he was running for Senate. Effective August 2020. The company told regulators that his departure "does not arise from any dispute between the company and Mr. Vance over any matter related to the company's business, policies or practices."
Although Vance is not named in any of the lawsuits, a private equity and venture capital watchdog has questioned his relationship with the company.
"As a venture capitalist, JD Vance promised to invest in Appalachia and promote AppHarvest, but then backed out before the company's problems were exposed," said Jim Baker, executive director of Private Equity Stakeholder Action. "Venture capital firms typically try to add value to the companies they invest in, but AppHarvest's value has declined since going public."