As previously disclosed, on March 24, 2022, the Company received a letter addressed to its Board of Directors (“Board”) from the law firm of Purcell & Lefkowitz LLP on behalf of three purported stockholders. Among other matters, the stockholder letter addressed the approval of the Company’s Second Amended and Restated Certificate of Incorporation at the special meeting of stockholders held on October 22, 2020, which included a 200,000,000 share increase in the number of authorized shares of Class A common stock (the “2020 Class A Increase Amendment”), and was approved by a majority of the then-outstanding shares of both the Company’s Class A and Class B common stock, voting as a single class. The stockholder letter alleged that the 2020 Class A Increase Amendment required a separate vote in favor by at least a majority of the then outstanding shares of Class A common stock under Section 242(b)(2) of the Delaware General Corporation Law (“DGCL”), and that the 200,000,000 shares in question are thus unauthorized.
Following receipt of the stockholder letter, the Board undertook a review of the matters raised with the assistance of outside counsel not involved in the underlying transactions at issue and had determined, in reliance upon, among other things, advice of several law firms including a legal opinion of Delaware counsel, that the assertions regarding DGCL Section 242(b)(2) were wrong and that a separate class vote of the Class A common stock was not required to approve the 2020 Class A Increase Amendment.
The Company continues to believe that a separate vote of Class A common stock was not required to approve the 2020 Class A Increase Amendment. However, in light of a recent decision of the Delaware Court of Chancery (“Court of Chancery”) that created uncertainty regarding this issue, the Company has filed a petition in the Court of Chancery pursuant to Section 205 of the Delaware General Corporation Law seeking validation of the 2020 Class A Increase Amendment and the shares issued pursuant thereto to resolve any uncertainty with respect to those matters. Section 205 permits the Court of Chancery, in its discretion, to validate potentially defective corporate acts and stock after considering a variety of factors.
While we believe that a separate vote of Class A common stock was not required to approve the 2020 Class A Increase Amendment, and therefore that all of our currently outstanding shares of Class A common stock were validly issued, if we are not successful in the Section 205 proceeding, the uncertainty with respect to the Company’s capitalization resulting from the Court of Chancery’s decision referenced above could have a material adverse effect on the Company, including on its ability to complete financing transactions, until the underlying issues are definitively resolved.
Forward-Looking Statements
This report includes forward looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by words such as “feel,” “believes,” expects,” “estimates,” “projects,” “intends,” “should,” “is to be,” or the negative of such terms, or other comparable terminology. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements contained herein due to many factors.
With respect to the matters addressed in this report, no assurances can be made regarding the outcome of our proceeding pursuant to Section 205 of the Delaware General Corporation Law or any claims, proceedings or litigation regarding the authorization of our common stock. Our Section 205 proceeding is, and any other litigation regarding the authorization of our stock would be, subject to uncertainties inherent in the litigation process, and may not result in timely resolution of the uncertainty regarding our capitalization, if at all. If we are unsuccessful in the Section 205 proceeding, claims alleging that a portion of our Class A common stock was not authorized could have a material adverse effect on the Company.
In addition, the transactions we entered into with Foxconn and future vehicle development plans are subject to risks and uncertainties. The additional funding transactions under the Investment Agreement, dated November 7, 2022, with Foxconn Ventures Pte. Ltd are subject to closing conditions including CFIUS clearance, further negotiation of EV program development plans and milestones and the accuracy of the Company’s representations on capitalization among other matters. Pending a decision by the Court of Chancery in the Section 205 proceeding, or if the relief requested is denied, the uncertainty with respect to our capitalization would likely prevent us from completing such funding transactions until the underlying issues are resolved. No assurances can be given that we will successfully implement or that we will realize the anticipated benefits from the funding arrangements, development plans and contract manufacturing agreement with