Taiwan’s Gogoro Inc, an electric scooter and energy-swapping giant backed by conglomerate Ruentex Group, is embroiled in an alleged subsidy fraud for using mainland China-made components instead of locally-produced parts in some of its products.
Multiple law firms notified investors in the past two days that they have commenced investigations into the Nasdaq-listed Gogoro in regards to its potential violations of the US federal securities laws.
The securities fraud class actions sent Gogoro’s stock price to $0.52 upon the market closing on Monday, only a fraction of the $14.02 closing price on its Nasdaq debut in April 2022.
The lawsuits came less than two weeks after Gogoro announced the resignation of its co-founder, chairman & CEO Horace Luke on September 13.
Luke’s departure followed “internal investigations into allegations in recent media reports that the company incorporated imported components into certain of its vehicles in violation of the requirement of the Taiwan government,” said Gogoro in an SEC filing.
The Taiwanese government requires certain core components of electric scooters to be produced locally in order to be qualified for subsidies to the purchasers.
“During such investigations, the company has identified certain irregularities in the supply chain which caused the company to inadvertently incorporate certain imported components in some of its vehicles,” said Gogoro, whose market cap plunged to $152.2 million as of Monday’s market closing.
Luke resigned from his positions “in an effort to show the company’s resolution to fully cooperate with the local authorities,” said the firm.
Gogoro’s board of directors nominated Ruentex Group’s general counsel, Tamon Tseng, to succeed Luke as chairman. Gogoro Taiwan general manager Henry Chiang was made interim CEO.
The development came after Gogoro’s biggest shareholder, Ruentex Group, through Gold Sino Assets Limited, made a $50-million investment in the firm in early June to support its business growth in Taiwan and other international markets.
Later the same month, engine oil maker Castrol, part of the British oil and gas major BP Plc, announced its plan to invest up to $50 million in Gogoro as the investor looks to diversify beyond its core lubricants and fluids business. The planned investment includes a first tranche of $25 million in Gogoro’s ordinary shares and a second $25 million in the form of a convertible note.
Gogoro, which was founded in 2011 and counts former US Vice President Al Gore among its early backers, is best known for its innovative battery-swapping solutions that eliminate the need for drivers to charge their electric scooters with a wall socket. Its battery-swapping network is available in 45 cities around the world, serving 2.8 million ecosystem subscribers.
The firm manufactures scooters for purchase outright, as well as renting the vehicles through a ride-sharing subscription programme called “GoShare.”
The past few years saw the firm accelerate its expansion into new markets, although the macroeconomic downturn and a slowdown of its sales in Taiwan have brought more challenges to Gogoro’s efforts in turning a profit.
Its latest market plans include an October foray into the Kathmandu Valley in Nepal in partnership with Nebula Energy, a subsidiary of Nepali conglomerate MG Group. It also plans to launch battery-swapping solutions and smart scooters in Singapore in Q4, together with its exclusive distribution partner auto group Cycle & Carriage.
The firm also signed new local partnerships recently to expand into markets like Colombia, Chile, India, and the Philippines.
However, Gogoro has been struggling to eke out a profit since its initial public offering (IPO) in 2022. Losses ballooned to $20.1 million in the second quarter of 2024 from $5.6 billion during the same period last year. Its gross margin declined to 5.2% in Q2 from 15.2% a year ago, according to its latest financial results.
The Taiwanese company went public via a merger with blank-cheque firm Poema Global Holdings in a deal that set its enterprise value at $2.35 billion. It raised $335 million through the merger, including PIPE financing of $295 million from investors like Indonesian tech giant GoTo and Singapore’s Temasek Holdings.
