AppHarvest, Inc. (APPH) Failed to Disclose Labor and Productivity Challenges to Investors
A shareholder filed a class action on behalf of all persons and entities that purchased or otherwise acquired AppHarvest, Inc. (NASDAQ: APPH) securities between May 17, 2021 and August 10, 2021, for violations of the Securities Exchange Act of 1934. The complaint alleges that defendants failed to disclose to investors that AppHarvest lacked sufficient training for its recently expanded labor force, which hindered its ability to produce Grade No. 1 tomatoes consistently, adversely impacting the Company’s financial results. AppHarvest is a sustainable food company that operates applied technology greenhouses to produce fresh, chemical-free, non-GMO fruits, vegetables, and related products.
AppHarvest became a public company following a business combination with Novus Capital Corporation that closed in January 2021. On May 17, 2021, AppHarvest announced its first quarter 2021 financial results and filed its quarterly report on Form 10-Q for the period ended March 31, 2021. That quarterly report noted that Mastronardi is the Company’s sole, exclusive marketing and distribution partner, and is only obligated to purchase products “at or above USDA Grade 1 standards and export quality standards within North America and of a quality required by Mastronardi’s customers, in Mastronardi’s sole determination.”
On August 11, 2021, AppHarvest announced its second quarter financial results, reporting a $32.0 million net loss. The Company also lowered its full year sales guidance to a range of $7 million to $9 million, from a prior range of $20 million to $25 million. AppHarvest attributed the lower than expected results to “operational headwinds with the full ramp up to full production at the company’s first CEA facility, including labor and productivity challenges related to the training and development of the new workforce and historically low market prices for tomatoes… Labor and productivity challenges resulted in lower net sales due to lower overall No. 1-grade production yields, including the impact of higher distribution and shipping fees.” On this news, the Company’s share price fell $3.46, or approximately 29%, to close at $8.51 per share on August 11, 2021. The stock currently trades under $6.00.
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