Did REE hide a $5.2 billion lawsuit from its shareholders?
Did REE hide a $5.2 billion lawsuit from its shareholders?
Attorney Ziv Ironi submitted a request for disclosure of documents on behalf of shareholders, after the autotech company, which has lost 96% of its value since its IPO in 2021, did not report a lawsuit filed against it in the US in December by OSR alleging theft of technology
Israeli auto-tech company REE Automotive, which is traded on Nasdaq, was sued at the end of December in a U.S. court by competing company OSR, which claims that REE stole technology from it. REE, which has lost approximately 96% of its value since it began trading on Nasdaq in July 2021, never disclosed the lawsuit filed by OSR, and it was only discovered following a document disclosure request submitted by Billie Ironi, one of REE's shareholders, to the economic court in Tel Aviv, through her husband, attorney Ziv Ironi.
REE is a company that helps in the development of electric vehicles, in elements such as the steering, brakes and other components. The company was founded in 2011 by Daniel Barel, who currently serves as CEO. Among the main investors in the company are Phoenix (7.9%), Aviram Ziv (6.8%), M&G Investment Management (6.4%) and Clal Insurance (5.6%). Until 2019, the company was called Softwheel, but due to a change in its technology focus, it changed its name to REE.
REE, which currently trades at a value of only about $100 million, completed a merger with a SPAC in July 2021 at an astronomical value of $3.1 billion. The plaintiff, OSR, is a Swiss company with an Israeli development center located in Petah Tikva, which is engaged in the development of technology for the automotive industry. The company's CEO is Orit Shifman. In the lawsuit she filed, OSR claims that REE stole the technology from the company's existing model, the EVOLVER, and that the technology in question formed the basis for the large SPAC deal. Now, OSR is demanding financial compensation of $5.2 billion - $2.6 for direct damage and another $2.6 billion for indirect damages. The lawsuit is being conducted in a district court in Texas, where REE's U.S. headquarters are located. The law firm representing OSR is Kasowitz Benson Torres, which has previously represented former U.S. President Donald Trump.
In the lawsuit, OSR makes a series of claims, one of the main of which is the hiring of the head of its research and development team, Ohad Stauber, by REE in 2019, along with other employees. According to the lawsuit, Stauber worked at OSR for two years. OSR claims that it can prove that Stauber connected an external hard drive to their computers, despite the obligation to keep developments secret. According to the plaintiff, Stauber allegedly transferred information amounting to 20 gigabytes, which included computer code, market research, development schemes, information sheets, technological analysis, and artificial intelligence algorithms.
According to OSR, when he left, Stauber allegedly tried to sabotage its activities, when he deleted code that were saved on his laptop, contrary to work procedures. About a year after Stauber's departure, according to OSR, the REE company unveiled new technology and changed its focus from developing a wheel with a shock absorber for a car, to developing a more comprehensive and extensive system. These developments, according to the plaintiff, led to REE's success in issuing itself at a value of $3.1 billion. In addition, OSR filed a lawsuit against Stauber. OSR says that Israel Police confirmed to it that it is indeed conducting an investigation against REE and Stauber.
On Tuesday, as mentioned, Bilie Ironi submitted a request for the discovery of documents. This, against the background of the fact that despite the large lawsuit filed by OSR against it, REE did not report it to investors. According to the request, the company also did not report on two warnings sent to it from OSR during 2022 and on negotiations that took place between the parties. The petitioner, attorney Ziv Ironi, was himself a candidate on behalf of Phoenix to serve as an external director at REE, after the insurance company was not satisfied with the level of corporate governance at REE. According to Ironi, the directors and management of REE abused their position when they did not report the lawsuit in the U.S. and breached the duty of care and the duty of loyalty to the investors. Therefore, Ironi requests to receive the internal and external correspondence of the company and its subsidiaries over the past two years. In addition, Ironi requests the details of the employees who moved from OSR to REE and the details of the police investigation that is allegedly being conducted against the company.
This is not the first time that OSR is suing its former employees. In 2021, OSR sued four of its employees alleging computer offenses and theft of trade secrets. The company even accused the employees of hacking its LinkedIn page. The employees claimed in response that OSR was abusing its power.
REE said in response: "The lawsuit focuses on an employee who started working at REE a few years ago. The company is examining the lawsuit and will act in the usual channels. In our estimation, these claims are nothing more than a smokescreen with the purpose of hiding OSR's ongoing failure to maintain quality personnel. We would add that this also smells of personal vindictiveness against employees who chose to resign from OSR."
