A class action lawsuit was filed against Shoals Technologies Group, Inc. (NASDAQ:SHLS) on March 21, 2024. The plaintiffs (shareholders) alleged that they bought SHLS stock at artificially inflated prices between May 17, 2022 and November 7, 2023 (Class Period) and are now seeking compensation for their financial losses. Investors who bought SHLS stock during that period can learn about joining the lawsuit here: https://zlk.com/pslra-1/shoals-technologies-lawsuit-submission-form?wire=16
Shoals Technologies claims to be one of America’s largest electrical balance of systems (EBOS) providers for solar, energy storage, and electric vehicle (EV) charging systems. Shoals’ components are used to carry the electric current produced by solar panels to an inverter and, ultimately, to the power grid.
The plaintiffs maintain that the company and five of its senior officers deceived investors by repeatedly lying and withholding vital information about its business practices and prospects during the Class Period.
The truth was revealed after the market closed on November 7, 2023, during Shoals’ earnings call. The company cited a $50.2 million warranty expense in Q2 FY23 that was related to a “shrinkback issue,” which affected 30% of its wireless harnesses installed between 2020 and 2022. Moreover, Shoals guided for a potential loss related to the same issue in the range of $59.7 million to $184.9 million.
Importantly, during the Class Period, Shoals always reiterated the reliability and stringent quality checks that its EBOS products underwent during the production process. As such, the company did mention the warranty on the products but repeatedly noted that the warranty reserve maintained by Shoals was very minuscule because of the high standard of its products.
As per the class action lawsuit, Shoals Technologies caused SHLS stock to trade at artificially inflated prices by knowingly and recklessly misleading investors about its business prospects.
Notably, on November 8, 2023, SHLS stock plunged by 10%. It has lost 58% in the past year, causing massive damage to shareholders’ returns.
