Class-action case against GT Solar seeks plaintiffs
Lawyers are seeking more plaintiffs in the class-action lawsuit against Merrimack’s GT Solar, as investors claim the company should have told them it was at risk of losing its largest customers before selling its stock.
The lawsuit is forging on, despite news that the lost customer, China-based LDK Solar, is back.
LDK has agreed to buy an estimated $32 million in reactors, GT announced Thursday. In a statement announcing the sale, LDK chief executive Xiaofeng Peng, lauded their “long-standing relationship.”
“As the demand for solar energy continues to grow, so does our need to increase and accelerate our manufacturing capacity,” Peng said.
But the promising news for GT Solar doesn’t change the status of the lawsuit because the suit was never about LDK being a customer. Instead, it centers on whether GT Solar should have disclosed it could lose them.
Dan Newman, a spokesman for the first law firm to file suit, said in an e-mail the class action seeks to recover damages for everyone who purchased GT Solar stock during the July initial public stock offering.
The day after going public on the Nasdaq stock exchange in July, LDK – its largest customer – had signed a major deal with a direct competitor.
Newman, of Coughlin Stoia Geller Rudman & Robbins, which has offices all over the United States and specializes in class-action suits, said the registration statement for the initial public offering “failed to fully disclose the risks surrounding the LDK relationship.”
GT Solar, which makes parts used in solar panels, launched its $50 million initial public offering July 24 at $16.50 a share, but the stock tumbled to as low as $9.30 the following day after LDK announced it had signed a major contract with JYT Corp., GT’s competitor.
In its IPO filings, GT disclosed that LDK represented 62 percent of the company’s sales in fiscal 2008, and there was an inherent risk at being so dependent on one customer. However, it did not indicate it was specifically in danger of losing LDK.
In the weeks following, some six lawsuits were filed alleging that the company knew or should have known about that danger, and should have disclosed it when making its IPO.
GT Solar said it has diversified its customer base since then, noting in its earnings report at the end of last month – and reiterated in another press release Tuesday – that it landed a $173 million contract with DC Chemical.
Thanks to such contracts, the company expects a strong year. But on Thursday, an analyst’s predictions of a short-time slowdown in the solar energy market appeared to have been a drag on stock prices throughout the industry.
At Thursday’s close, GT Solar shares were selling at $11, up 24 cents. By close Friday, they were trading at $10.90.