New tariffs on imported steel and aluminum are central factors in a civil suit claiming REV Group misled investors prior to two 2017 public stock offerings that netted $588 million. REV shares have dropped 60 percent since the second offering.
REV is the parent company of 29 specialty vehicle brands, including eight shuttle and school bus manufacturers. It is the U.S. distributor for Setra motorcoaches built in Neu-Ulm, Germany, by Daimler AG.
About 12.5 million shares were sold at $22 in an initial public offering and $27.25 in the second public offering of 11.5 million shares. On April 1, the company, listed on the New York Stock Exchange as REVG, traded at $11.03.
The investor suit, filed in U.S. District Court for the Eastern District of Wisconsin, claims violations of federal securities laws. “During the Class period, REVG securities were artificially inflated due to Defendants’ misleading public statements . . . insiders sold over $300 million worth of Company stock while in possession of material, adverse and nonpublic information.”
In its response, REV and related defendants claim the company’s financial downfall was prompted by tariffs imposed by U.S. President Donald Trump.
“After tariffs sent commodity prices rising and prompted a shortage of vehicle chassis, the Company reported that its earnings for its second quarter of fiscal 2018 had not grown as compared to the prior year,” the company’s court filing states. “REV Group repeatedly cautioned customers in its public disclosures that an interruption in chassis supply or a spike in prices for commodities could negatively affect its ability to meet its financial projections.”
The investors claim factors preceding the tariffs made REV’s forecasts questionable but executives “knew and/or recklessly disregarded the falsity and misleading nature of the information they caused to be disseminated to the investing public.” The plaintiffs allege that former managers of two of REV’s segments had warned executives that the 2018 goals were not feasible.
REV became the U.S. distributor for Setra in January 2018 after the stock offerings. REV delivered 17 Setra motorcoaches in 2018, a source told Bus & Motorcoach News. Deliveries through the previous Setra distributor, Motor Coach Industries, ranged from 50 to 145 annually from 2012 through 2017. A Daimler spokesman declined to discuss any effects REV’s financial issues may be bearing on Setra in the U.S. A REV Coach executive did not respond to requests for comments.