A class action lawsuit was filed against STMicroelectronics (STM) by Levi & Korsinsky on August 23, 2024. The plaintiffs (shareholders) alleged that they bought STM stock at artificially inflated prices between January 25, 2024 and July 24, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought STMicroelectronics stock during that period can click here to learn about joining the lawsuit.
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STMicroelectronics offers microchips, which are embedded in several diverse products, including electric cars, data centers, and smartphones.
STM’s Misleading Claims
According to the lawsuit, STMicroelectronics and two of its senior officers (Individual Defendants) are accused of deceiving investors by lying and withholding crucial information about the company’s business and prospects during the Class Period. Particularly, they are accused of omitting truthful information about the company’s forecasting ability and ancillary issues from SEC filings and related material.
The company allegedly made favorable statements about its business, which were misleading. For instance, in an earnings call at the beginning of the class period, STM’s CEO assured investors about a solid backlog in the Automotive business.
Additionally, during the Citi Technology, Media & Telecom Conference held on March 12, 2024, the CEO stated that the company is not seeing any massive inventory correction, has a strong backlog, and expects like-for-like growth of slightly more than 10% in the Automotive business.
In contrast to these disclosures, subsequent events revealed weakness in the company’s business.
Plaintiffs’ Arguments
The plaintiffs maintain that the Defendants made false and misleading public statements throughout the Class Period.
The truth came out on July 25, 2024, when STMicroelectronics announced disappointing results for the second quarter of Fiscal 2024 with a 25.3% drop in revenue. Also, STM slashed its full-year revenue guidance to the range of $13.2 billion to $13.7 billion, a reduction from the prior forecast of $14 billion to $15 billion.
The company blamed its weak Q2 performance and revenue outlook on lower Automotive demand and the lack of improvement in customer orders for industrial sector products, which was in contrast to its previous expectations.
The company’s announcement dragged down its stock by more than 15% on the same day.
To conclude, STMicroelectronics allegedly misled investors about the prospects of its business and the challenges it was facing. Consequently, STM stock has declined over 42% year-to-date, causing damage to shareholder returns.
