SolarCity has landed in legal trouble as a class-action lawsuit has been filed against it in the U.S. District Court for the Northern District of California on behalf of a class consisting of persons and entities that acquired its securities between May 5, 2015, and February 9, 2016, announced the Wagner Firm, which filed the lawsuit. Anyone who is a member of the class described above and intends to serve as lead plaintiff is required to move to the court within 60 days from the date of the notice.
SolarCity accused of making false statements
On October 29, 2015, SolarCity announced that it would lower its full-year 2015 guidance, following which the company’s stock price fell 22% ($8.42 per share) to close at $29.65 on October 30, 2015. Then on February 9, 2016, the company revealed that it could not meet the installation guidance it had previously issued for fiscal 2015.
This led to a further decline of 29% or $7.72 per share in the stock price, after which it was noted at $18.63 on February 10, 2016, and this harmed investors. SolarCity and some of its officers have been accused of violating federal securities laws in the complaint.
The complaint specifically alleges that the defendants made false and/or misleading statements and/or failed to disclose some things: “(1) that demand for the Company’s products was weakening; (2) that the Company was concealing the weakening demand from investors.” Thirdly, because of all this, the statements that the defendants made about SolarCity’s operations, business and prospects were allegedly not only false and misleading but also lacked a reasonable basis.
Hedge fund investor drops SolarCity
SolarCity’s latest quarterly filings show that a large hedge fund investor cut most of his stake during the second-quarter — the period when the company received a buyout offer from Tesla. According to a recent securities filing, Gilder Gagnon Howe & Co. owed 43,840 shares of SolarCity at the end of June, down from 832,139 shares at the end of the first quarter. In the same period, Gagnon boosted its stake in Tesla by 24%.
Earlier this month, SolarCity accepted the $2.6 billion offer from Tesla. This deal was first announced on June 21 and is a step ahead in Elon Musk’s plan of creating a carbon-free energy and transportation company. Tesla’s stock dropped 10% on the first trading day after the merger was announced, and this made some skeptical of the deal. SolarCity has seen its shares decline by more than 50% this year.
On Monday, SolarCity shares closed up 1.22% at $23.99.