By Jim Utter
Director of Journalism
Driven Brands Holdings Inc., the largest automotive services company in North America, is facing another shareholder class action lawsuit – the third filed since December 2023.
The most recent verified stockholder derivative action was filed on April 30 in the U.S. District Court for the Western District of North Carolina in Charlotte, N.C., by Jonathan Gaiman, a shareholder in Driven.
All three lawsuits are similar in nature, accusing the company’s executives of concealing problems with the integration of purchased auto glass companies and the performance of their car wash segment (Take 5 Car Wash) for nearly two years before a record stock drop.
Driven shares plummeted more than 41 percent on Aug. 2, 2023, after the company slashed its full-year revenue guidance following the disclosure of the glass segment’s integration delays and losses in its car wash segment.
According to Bloomberg, at the time, it was the stock’s greatest single-day decline since its debut in the market in 2021.
In his suit, Gaiman alleges “violations of federal securities laws, caused by the issuance of materially false and misleading statements issued, or caused to be issued, by the Individual Defendants in the Company’s SEC filings and other public statements.
“The Individual Defendants’ wrongdoing has exposed the Company to massive potential liability to the class, as well as the significant defense costs in the Securities Class Action.”
Gaiman’s suit contends Driven’s leadership repeatedly insisted the company’s expansion into the auto glass market would fuel rapid growth and that a key element of the success of its overall growth strategy would be the steady growth of its car wash business, which at the time accounted for more than 30 percent of its earnings.
Despite the positive statements put forth by the company at the time, the suit contends both segments (auto glass and car wash) were suffering significant issues that were negatively impacting Driven’s aggressive growth strategy.
The suit seeks monetary damages from those named for “all losses and damages” suffered from the alleged conduct; punitive damages; and attorneys’ fees.
Similar suits were brought in December 2023 by the Genesee County Employees’ Retirement System and in January of this year by Daniel Terwilliger – both shareholders between Oct. 27, 2021, and Aug. 1, 2023.
Both of those suits continue to work their way through the court system.
In late February of this year, Driven Brands announced it had entered into a definitive agreement to sell off its entire U.S. car wash business to Whistle Express Car Wash for $385 million. The deal was completed on April 10.
Driven’s board of directors also named COO Daniel Rivera as the company’s new president and CEO and appointed him to the board, effective May 9.
Driven Brands, headquartered in Charlotte, N.C., is the parent company of some of North America’s leading automotive service businesses including Take 5 Oil Change, Meineke Car Care Centers, Maaco, 1-800-Radiator & A/C, and CARSTAR.
