- Some investors of Shoals have filed a lawsuit against the company through the law firm Bernstein Liebhard
- They have indicted the company of not being open about the extent of the wire shrinkback issue that it revealed during Q3/2023
- It is also accused of understating its cost of revenue by millions of dollars
The US-headquartered electrical balance of system (EBOS) company Shoals Technologies is facing a securities class action lawsuit filed by law firm Bernstein Liebhard on behalf of company investors.
Filed in the US District Court for the Middle District of Tennessee, the lawsuit alleges the company to have violated the Securities Exchange Act of 1934. The company is accused of not disclosing to investors that:
- It did not deliver EBOS products that met the highest levels of quality and reliability
- It received reports of exposed copper conduit in EBOS wire harnesses in a large number of solar fields and was aware that a significant portion of its wire harnesses had defects
- Shoals would have to incur $60 million to $185 million in costs to remediate “wire shrinkback” – the tendency for the insulation of a wire to pull back from a splice or termination connector; and
- It had understated its cost of revenue by millions of dollars.
Shoals had reported $50.2 million in wire insulation shrinkback expenses in Q3/2023 which impacted its gross profit and led to a -$9.8 million net loss. It had sought damages from the supplier Prysmian Cables and Systems USA with regard to the repair and replacement of the defective wire (see Higher Sales Volumes Drive Shoals’ Q3/2023 Business).
The manufacturer had shared earlier that it expects the wire shrinkback issue to cost between $59.7 million and $184.9 million to remedy. This led to its share value dropping by over 10% on November 8, 2023, according to the law firm.
The law firm says the investors on whose behalf it has launched the lawsuit are those who purchased or acquired the common stock of Shoals between May 17, 2022 and November 7, 2023. The firm is inviting other investors in the company to explore their legal rights and options.
Shoals, meanwhile, is expanding its manufacturing capacity by expanding to a larger location to meet growing customer demand for solar (see Eyeing Growth, Shoals Technologies Group To Expand).
