Albuquerque-based solar manufacturer Array Technologies faces a new lawsuit alleging the company failed to disclose the rising costs of doing business.
The complaint, filed on May 14 by the Plymouth County Retirement Association in Plymouth, Massachusetts, alleges Array Technologies made a series of false and misleading statements in documents filed regarding its initial public offering and subsequent public offerings. Array Technologies declined to comment through an external spokesman, James McCusker — managing director at Solebury Trout — who said in an email that "as a policy they do not comment on pending litigation." The complaint was filed in the U.S. District Court for the Southern District of New York.
The company builds solar trackers, or mechanisms that move solar panels depending on the position of the sun, increasing energy output.
The lawsuit cites multiple statements made by Array Technologies in U.S. Securities and Exchange Commission (SEC) filings regarding three public offerings, including its initial public offering in October. The statements included declarations such as "we continually work to reduce the cost of our products through innovation and rigorous supply chain management" and "our strategy is to continually reduce our cost of goods sold by leveraging the large volumes of materials and components we purchase against multiple, qualified suppliers," the lawsuit says.
But over time, supply chain costs have increased. As part of its most recent quarterly report, the company missed its quarterly profit expectation and withdrew its full-year outlook, citing increases in steel and freight costs, according to MarketWatch. Quarterly gross profit decreased 63% compared to the previous year, mainly driven by "lower volume," according to the company. Array also reported significant increases in quarterly operating expenses.
"At the same time as we are seeing record demand for solar, our industry is contending with increases in steel and shipping costs that are unprecedented both in their magnitude and rate of change," CEO Jim Fusaro said in a May 11 earnings release. "From Q1 2020 to Q1 2021, spot prices of hot rolled coil steel, the primary raw material used in our products, more than doubled and have continued to increase in the second quarter with spot prices up over 10% since April 1st. Steel represents almost half of our cost of goods sold and we do not hold large amounts of steel inventory, so a significant increase in the price of steel over a short period of time can negatively impact our results."
In response, the lawsuit contends that Array "repeatedly and consistently painted a materially misleading picture of the company’s business and prospects that did not reflect these rising costs" on account of SEC filings made pursuant to its public offerings.
The Plymouth County Retirement Association seeks damages, interest and other costs, according to the court complaint, as well as a jury trial. The association purchased Array securities relating to the IPO and a secondary public offering in March 2021, according to the complaint.
Array's stock price dropped by nearly a third following this month's quarterly call and remains well below where it was valued at the time of its IPO, when it hit $38 per share. Following its $1 billion IPO this past year, Reuters reported that the company was valued at $2.8 billion. The upsized public offering included 47.5 million shares at $22 per share.
Over the years, Array Technologies has become a significant employer, with 389 full-time employees as of the end of 2020, according to SEC filings. Ron Corio — who is a current board member — founded the company in 1992, and since then it has reportedly grown to be one of the leading solar tracker vendors in the world.
Array Technologies is headquartered in Albuquerque at 3901 Midway Place NE and has reportedly leased millions of square feet of space across the country.
