'Fraud Controversy' at US Rose Town, Executive Resignations Follow

[Asia Economy Reporter Yujin Cho] Key executives of the U.S. electric truck startup RozeTown Motors have resigned together three months after fraud allegations surfaced.

On the 14th (local time), according to The Wall Street Journal (WSJ) and others, RozeTown announced that CEO Steve Burns and CFO Julio Rodriguez expressed their intention to resign on the same day.

The announcement of the top executives' resignation came amid an ongoing investigation by authorities over fraud allegations.

Photo by Bloomberg News

In March, short-seller Hindenburg Research released a report suggesting that RozeTown may have inflated pre-order figures and other performance metrics to raise funds for the development of its 'Endurance' electric pickup truck.

RozeTown stated that it could begin production of the truck in September this year, but Hindenburg Research claimed that it would take several more years to start production.

RozeTown, which is under investigation by the U.S. Securities and Exchange Commission (SEC), has denied most of the claims made in the Hindenburg Research report.

General Motors (GM), which holds 5% of RozeTown's shares, said, "There is no change in our RozeTown stock holdings," but refrained from commenting on the changes in key management.

Earlier, RozeTown disclosed in a recent quarterly report that it is in a situation where it cannot sustain its business due to financial deterioration. RozeTown reported, "We do not have sufficient funds to manufacture electric trucks," and expressed "significant doubt about our ability to continue as a going concern for the next year."

RozeTown recorded a net loss of $125 million (approximately 139 billion KRW) in the first quarter of this year, and its cash equivalents stood at $587 million as of the end of the first quarter.

In October last year, RozeTown went public on Nasdaq through a merger with a Special Purpose Acquisition Company (SPAC), riding the wave of electric vehicle investment enthusiasm. However, due to fraud allegations and management difficulties, its stock price has fallen more than 40% since the beginning of this year.

Meanwhile, RozeTown announced that until a new CEO is found, outside director Angela Strand will serve as the chairperson of the board to oversee transitional company management, and Becky Loof will serve as interim CFO.

Chairperson Strand said in a statement on the day, "We will continue to strive to fulfill our manufacturing and commercialization goals and maintain top-level management and performance." The company also plans to proceed as scheduled with a briefing next week at its Ohio plant for the media, investors, and analysts.