Lion Electric shareholders file class-action against struggling bus manufacturer

Lion Electric Co.'s lithium-ion battery manufacturing facility is shown in Mirabel, Que., Thursday, Sept. 14, 2023. THE CANADIAN PRESS/Christinne Muschi

MONTREAL — Quebec-based electric-vehicle manufacturer Lion Electric Co. is facing a class-action lawsuit from shareholders who allege the company misled investors and misrepresented its financial health, leading to artificially inflated stock prices.

"Damages suffered by the members of the proposed group are the direct and immediate result of the false and misleading representations, omissions and failures to provide continuous information by the defendants," said the court filing dated Friday.

The proposed securities class action claims Lion Electric, headquartered in St-Jérôme, Que., hid facts and details about its order book and production capacities from investors. Class members include those who invested in the company between May 7, 2021, and Dec. 15, 2024.

"It was not until December 2024 that the full truth became known to the market, such that there was no longer any artificial inflation in the value of Lion Electric’s securities attributable to the defendants’ misconduct," the document said.

With US$500 million in debt, Lion Electric obtained protection from its creditors in December and is seeking a buyer with a restructuring plan that would focus only on school buses and return all manufacturing to Quebec. Earlier this month, a Quebec Superior Court judge extended the company’s creditor protection to April 4, and bids on the company must be made by March 7.

Shareholders allege the company's alleged actions led to huge financial losses for them, claiming that when Lion Electric's struggles became public the stock lost 96 per cent of its value on the Toronto and New York stock exchanges.

In an emailed statement on Monday, Patrick Gervais, spokesman for Lion Electric, said, "Given the legal procedures, we will not comment." The allegations in the class action have not been tested and the lawsuit has not yet been authorized.

Among those named in the 101-page lawsuit are directors, officers, auditors and underwriters of the company. The suit alleges that when the company went public, Lion's bosses presented a positive outlook on the business's productivity and profitability.

"Each time, Lion Electric’s management reiterated that the production rate was increasing, that the company’s customers were satisfied, that the order book was constantly growing and that Lion Electric was on the path to profitability," the lawsuit says. "All in all, Lion Electric's dream was on the way to becoming a reality."

The company trumpeted deals with clients like with Amazon, Canadian National Railway and Ikea. Some companies, such as Molson Coors and Agropur, never had contracts with Lion — but their logos appeared on presentations to investors until May 2022, and were removed without explanation.

Former employees say in the filing that vehicles were defective and not up to customer expectations. "Its approach to producing electric trucks did not reflect the pace of the market and was not aligned with its order book and its facility size far exceeded its needs and was not being maximized," the filing said.

The lawsuit also cited quarterly financial results and annual results between 2021-24. It says that investors began learning about the company's troubles in May 2023. The company's order book was allegedly dwindling and deliveries were on the decline, affecting revenue, growth and liquidity.

"During this period, Lion Electric’s securities fell precipitously as the artificial inflation caused by the defendants’ misconduct dissipated from the value of the company’s securities, causing a real economic loss to the members of the proposed class," the filing reads.

The lead plaintiff in the class-action case is Adam Mulhall, a member of Invest-Lion, a group representing investors.

This report by The Canadian Press was first published Feb. 24, 2025.

Sidhartha Banerjee, The Canadian Press