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Shareholder Sues A123 Systems (AONE) Over $55 Million Recall Loss
Lithium ion battery maker A123 Systems Inc. (NASDAQ: AONE) failed to disclose that the company had “severe manufacturing deficiencies” at one of its plants, resulting in a wide-ranging recall that the company expects to cost $55 million, a class action filed in Massachusetts federal court alleges.
A123 participated in a scheme to deceive investors into purchasing shares at artificially inflated prices, according to the complaint. The company’s financial statements and comments prior to the recall announcement were “materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about A123’s operations and business prospects,” the complaint says.
On March 26, A123 said in a press release that it would incur costs of over $55 million in the next several quarters to replace battery modules and packs that might be defective. Specifically, five auto customers received parts that probably contained defective prismatic cells. The $55 million represents approximately one quarter of the company’s projected annual revenue for 2012, which it estimated to be between $230 million and $300 million. In reaction to the news, A123 shares declined by more than 12%, to close at $1.49 per share.
During a conference call on the same day as the company’s announcement of the recall, A123 CEO David P. Vieau admitted that “virtually all” of the products produced in the Livonia facility were contaminated with the defect, the complaint adds.
Nearly two weeks before the recall announcement, however, the company filed an annual report without mentioning any manufacturing issues at the facility, the lawsuit says. In that report, the company described the prismatic cells that are being recalled as an “advanced high-power and long-life lithium-ion energy storage solution.”
If you purchased shares of A123 from February 28, 2011 and March 23, 2012, you may file a motion with the court no later than June 1, 2012, and request that the court appoint you as lead plaintiff. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. To be appointed lead plaintiff, the court must decide that your claim is typical of the claims of other class members and that you will adequately represent the class. Your share in any recovery will not be enhanced or diminished by your decision of whether or not to serve as a lead plaintiff. You can recover as an absent class member without moving for lead plaintiff. The action discussed here was not filed by Milberg.
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