Plug Power Defends Amazon Relationship, Accounting in Delaware

Hydrogen fuel cell maker Plug Power Inc. asked the Delaware Chancery Court on Monday to follow a federal court’s lead in dismissing allegations of insider trading against its senior leaders.

Investors claim an agreement with Amazon.com Inc., the company’s most important customer, drove directors and executives to dump $122 million worth of shares just before the stock plummeted upon news that Plug Power’s 2020 financial statements had to be restated because of accounting issues.

The consolidated complaint before Chancellor Kathaleen St. Jude McCormick followed a federal securities class action in New York prompted by the 2020 restatement. McCormick adjourned Monday’s hearing without ruling on Plug Power’s motion to dismiss the Delaware litigation.

Investors didn’t appeal the dismissal of the New York case, and that judge’s “observations are just as pertinent here as they were there,” said John Clarke Jr. of DLA Piper, representing Plug Power.

McCormick should reach the same conclusion as the New York judge, Clarke said—that Plug Power and its board weren’t aware of any accounting issues until KPMG raised them and delayed the release of the company’s full, audited financial statements for 2020.

“This is a complaint in search of a claim,” Clarke said.

Investors allege Plug Power, which provides fuel cell products that replace conventional batteries in electric vehicles and other equipment, issued false and misleading financial information about the costs of a transaction with Amazon for warrants under a 2017 purchase agreement.

“It was no longer a profitable contract, and they knew that,” said Lee Squitieri of Squitieri & Fearon, the investors’ attorney. “There was a rush to the exits, to say the least.”

While the exact dollar amount may not have been known, Plug Power directors knew the Amazon relationship had tipped toward a loss, and that knowledge fell under the company’s insider trading policy, he said. The price of Plug Power stock had risen substantially, making the price for Amazon’s next tranche of warrants far higher than two previous transactions.

Plug Power negotiated with Amazon to waive vesting conditions on its remaining warrants and eliminate long-term costs related to them. When Amazon no longer had any obligation to lease Plug Power’s equipment, senior leaders knew a substantial change was coming, “and that’s enough for material, nonpublic information that precludes an officer and director from trading,” Squitieri said.

By the fourth quarter of 2020, Plug Power’s board and management had begun discussing a way to exit its arrangement with Amazon, as the conditions for pricing its next tranche of warrants had been met, Clarke said.

Plug Power was “timely” in making its disclosures regarding the Amazon relationship, he said.

The investor is also represented by Rigrodsky Law PA and Moore Kuehn PLLC. Individual Plug Power directors, executives, and former directors are represented by Richards Layton & Finger.

The case is In re Plug Power Inc. S’holder Derivative Litig., Del. Ch., No. 2022-0569, hearing 11/4/24.