The suit filed in Delaware Chancery Court against Pudong Science and Technology Investment Co. (PDSTI)—a Chinese firm that owns a majority of Icon shares—wants to block the company from sending proprietary information to China and replace the current Icon board. It also seeks unspecified damages.
“Defendants have illegally breached, and continue to breach, their fiduciary duties to ICON and plaintiffs in order to facilitate the expropriation of ICON’s intellectual property in aircraft design, aircraft manufacturing, and advanced carbon-fiber structures manufacturing to China,” according to the suit by 35 minority shareholders filed on June 1.
Icon was founded in 2006 and produces the A5 amphibious, two-seat, light sport aircraft with folding wings and a stall-resistant design. The suit claims the company’s expertise in carbon fiber manufacturing and aircraft design is applicable to drones and electric vertical takeoff and landing aircraft, and has civil and military applications, and that Chinese investors are interested in these aspects to the detriment of the company.
“I joined ICON’s board because I believed in the company’s mission, the qualifications of the founding team, and the exceptional design and engineering in their aircraft,” said Condit, who resigned from the Icon board because of his concerns about technology transfer. “I believe strongly that good governance is at the very heart of [a] trustworthy economic system. The board has a fiduciary responsibility to all shareholders and without that trust, critical investments cannot be made. If Chinese investments are masquerading as venture capital in order to gain access to U.S. technology, it violates this trust. As the lawsuit explains, the investments by PDSTI in ICON were never intended to make the company successful. Rather they were part of a plan to gain technology and defraud minority shareholders.”
The suit says Icon was close to an agreement with Yamaha that would have given the Japanese firm a controlling stake in Icon and potentially expanded its product line beyond the A5, but the Chinese owners blocked it because they’re more interested in transferring Icon’s technology than having the company succeed in the marketplace.
Icon announced in 2018 that founder and then-CEO Hawkins was taking a temporary sabbatical, and the suit claims that move was meant to block new investments that Hawkins was close to securing. Hawkins was subsequently replaced as chief executive.
Instead of allowing Icon to get the capital it required to thrive, PDSTI sidelined Hawkins in an intentional effort to kill any chances of outside financing so it could continue to control Icon unilaterally for its strategic and financial objectives in China, the suit also claims.
Icon officials acknowledged that the suit had been filed and said the company won’t comment on an “active legal matter.”