Babcock & Wilcox Enterprises (BW) told investors its AI data center power deal was a game-changer. The stock soared as executives pointed to explosive growth in the backlog. But investors later learned allegations that cast doubt on this supposed big deal.
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Investors who purchased Babcock & Wilcox Enterprises stock are watching closely after a federal lawsuit alleged the company hid a key conflict of interest tied to high-profile AI data center power contracts that helped send its stock soaring, then tumbling.
A federal securities lawsuit was filed on April 14, 2026, in the United States District Court for the Northern District of Ohio against Babcock & Wilcox Enterprises, Inc., and two of its top executives. The complaint centers on two AI-related power agreements announced between November 2025 and March 2026, which the company touted as transformational and worth up to $2.4 billion, but which a short-seller report later alleged were tainted by undisclosed conflicts and overstated in their likely economic value. The proposed class period runs from November 5, 2025, through March 11, 2026. Following the publication of a short-seller report on March 12, 2026, the stock fell $1.71 per share, or approximately 11.59%, to close at $13.05.
If you purchased B&W securities during the class period, you may wish to learn more about your rights and options.
What the Company Does and Who Is Involved
Babcock & Wilcox Enterprises, Inc. is a Delaware corporation headquartered in Akron, Ohio, whose common stock trades on the New York Stock Exchange under the ticker symbol “BW.” According to the complaint, the company, through its subsidiaries, provides energy and emissions-control solutions to industrial, electric utility, municipal, and other customers in the United States, Canada, the United Kingdom, Indonesia, and the Philippines. The company’s largest shareholder is BRC Group Holdings, Inc., formerly known as B. Riley Financial, Inc., whose co-chief executive officer and chairman of the board is Bryant R. Riley. The individual defendants named in the complaint are Kenneth M. Young, B&W’s chairman and chief executive officer, and Cameron Frymyer, the company’s executive vice president and chief financial officer.
What the Lawsuit Claims Went Wrong
The complaint alleges that during the class period, defendants made materially false and misleading statements in connection with two AI-related power agreements, referred to as the Power Generation LNTP and the Power Generation Contract. Specifically, the complaint alleges defendants failed to disclose that B&W’s largest shareholder, BRC, stood on both sides of the Power Generation Contract and had close ties to the counterparty; that Applied Digital Corporation did not actually need the products and services B&W was purportedly engaged to supply; and that the risk that B&W might recognize far less revenue from these agreements than investors had been led to expect was greater than disclosed. The complaint further alleges that as a result of these omissions, the company’s business and financial prospects were materially overstated throughout the class period.
Investors who held B&W securities during the class period are encouraged to follow this case as it develops.
What Management Said During the Class Period
The complaint cites extensive statements by both named executives across press releases, SEC filings, and earnings calls. In a November 4, 2025, press release and accompanying earnings release, defendant Young was quoted as calling the initial AI power agreement “profound,” stating it added over $3 billion to the company’s pipeline and brought the total global pipeline above $10 billion. On the November 10, 2025, earnings call, Young told investors the full project would be worth “over $1.5 billion” once finalized and estimated that 10% to 15% of that value could be recognized in fiscal year 2026, characterizing that potential as “significant upside” to guidance. When the larger $2.4 billion Power Generation Contract was announced on March 4, 2026, Young was quoted describing it as proof of B&W’s “strategic role” in AI data center power and touting a backlog that had grown by 470% compared to year-end 2024. Frymyer echoed these representations on the earnings call, confirming that the company’s 2026 EBITDA guidance excluded any AI data center contributions, framing those projects as purely additive upside.
How the Alleged Truth Came to Light
The complaint alleges the truth began to emerge on March 12, 2026, when Wolfpack Research, a short seller, published a report alleging that defendants had failed to disclose the close relationship between B&W’s largest shareholder, BRC, and Base Electron, the counterparty to the $2.4 billion Power Generation Contract. Wolfpack alleged that BRC co-CEO and chairman Bryant Riley was also a director of Base Electron, and that Base Electron’s registered address matched BRC’s headquarters rather than Applied Digital’s. The Wolfpack report also noted that Base Electron’s articles of incorporation were not filed until December 23, 2025, seven weeks after the initial LNTP was announced. Additionally, the report alleged that Applied Digital’s existing data center projects already relied on conventional grid power, raising doubts about whether the company needed the new capacity B&W was contracted to build. Following the report’s publication, B&W’s stock fell $1.71 per share, or approximately 11.59%, on March 12, 2026.
Why Shareholders Should Pay Attention
The complaint presents a straightforward narrative of alleged omission: defendants repeatedly cited large contract values to support claims of a robust backlog and transformational business prospects, without disclosing that the company’s largest shareholder had undisclosed ties to Base Electron, the counterparty to the later $2.4 billion Power Generation Contract. The complaint also highlights that Applied Digital could terminate its guarantee in certain circumstances for as little as $50 million. In the weeks before the Wolfpack report, BRC sold its entire directly held position in B&W common stock at $9 per share, a price 140% above the stock’s close before the initial announcement, according to the complaint.
The Legal Claims
The complaint asserts two causes of action under the federal securities laws. Count I alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, claiming defendants made untrue statements of material fact or omitted material facts necessary to make their statements not misleading in connection with the purchase and sale of B&W securities. Count II alleges violations of Section 20(a) of the Exchange Act against the individual defendants, Young and Frymyer, as controlling persons of B&W who are alleged to have directed or participated in the unlawful conduct. The complaint seeks damages on behalf of all investors who purchased or acquired B&W securities during the class period and were harmed by the alleged corrective disclosures.
If you purchased B&W securities between November 5, 2025, and March 11, 2026, you may have legal rights worth exploring with qualified securities counsel.
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