NEW YORK, March 25, 2024 (GLOBE NEWSWIRE) — Gainey McKenna & Egleston announces that a securities class action lawsuit has been filed in the United States District Court for the Middle District of Tennessee on behalf of all persons or entities who purchased or otherwise acquired Shoals Technology Group, Inc. (“Shoals” or the “Company”) (NYSE: SHLS) securities between May 17, 2022 and November 7, 2023, inclusive (the “Class Period”). The lawsuit seeks to recover damages for the Company’s investors under the federal securities laws.
The Complaint alleges that Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, the Complaint alleges that the Defendants failed to disclose to investors that: (1) Shoals did not deliver EBOS products that met the highest levels of quality and reliability; (2) Shoals had received reports of exposed copper conduit in EBOS wire harnessess in a large number of solar fields and was aware that a significant portion of its wire harnesses had defects; (3) Shoals would have to incur between $60 million to $185 million in costs to remediate the wire shrinkback issue; and (4) Shoals had understated its cost of revenue by millions of dollars. The Complaint further alleges that as a result, Defendants’ positive statements about the Company’s financial guidance, business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.
The Complaint also alleges that the truth emerged after the close of markets on November 7, 2023. That day, Shoals filed its Quarterly Report on Form 10-Q for the third quarter of 2023 (“2Q23 10-Q”) and held an accompanying earnings call in which Defendants revealed that the wire shrinkback issue was far more severe than previously disclosed. Specifically, the Company reported that the shrinkback issue affected 30% of Shoals’ wire harnesses installed between 2020 and 2022, booked a $50.2 million warranty expense for the second quarter of 2023 related to the shrinkback issue, and provided a range of potential loss related to the shrinkback issue of $59.7 million and $184.9 million.
The Complaint further alleges that, documents from litigation Shoals brought against the supplier of the wire related to the defective wire harnesses show Shoals knew of significant issues with shrinkback by at least March 2022—more than one and a half years before it disclosed the huge liability it would entail to investors. The Complaint also alleges that, Shoals itself alleged in that action, in March 2022, the Company received information about exposed copper conduit on wire installed in Shoals EBOS components at a customer’s solar field in Arizona. According to the Complaint, on March 24, 2022, representatives of Shoals and others visited the solar field and inspected the defective wire harnesses. Thereafter, the Complaint alleges that Shoals replaced those harnesses at its own expense. In addition, the Complaint further alleges that Shoals admited, by “late 2022 . . . numerous other Shoals’ customers began reporting similar instances of cooper conductor exposure.”
The Complaint alleges following the November 7, 2023 disclosures, the price of Shoals’ stock dropped $3.28 per share, or more than 20%, to close at $12.95 per share on November 9, 2023, wiping out approximately $550 million in market capitalization.
Investors who purchased or otherwise acquired shares of Shoals should contact the Firm prior to the May 21, 2024 lead plaintiff motion deadline. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. If you wish to discuss your rights or interests regarding this class action, please contact Thomas J. McKenna, Esq. or Gregory M. Egleston, Esq. of Gainey McKenna & Egleston at (212) 983-1300, or via e-mail at tjmckenna@gme-law.com or gegleston@gme-law.com.
Please visit our website at http://www.gme-law.com for more information about the firm.
