- Company Name
- Flex Ltd.
- Stock Symbol
- Class Period
- January 26, 2017 to October 25, 2018
- Motion Deadline
- June 4, 2019
- Northern District of California
The complaint charges Flex and certain of its officers with violations of the Securities Exchange Act of 1934. Flex provides design, engineering, manufacturing, real-time supply chain insight and logistics services to companies of all sizes in various industries and end-markets.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose material adverse facts about the Company’s business, operations and prospects. Specifically, according to the complaint, defendants failed to disclose that the Company’s internal controls over financial reporting were materially weak and deficient, and as a consequence, the Company had improperly accounted for obligations in a customer contract and certain related reserves. In addition, defendants failed to disclose that Flex’s contract with Nike to automate sneaker manufacturing, the most crucial contract in the Company’s pipeline, was failing operationally and was not commercially viable. As a result of defendants’ false statements and/or omissions, the price of Flex ordinary shares was artificially inflated during the Class Period to a high of $19.61 per share.
On April 26, 2018, Flex announced that is Audit Committee, with the assistance of independent counsel, was investigating allegations by a former employee that the Company had improperly accounted for obligations in a customer contract and certain related reserves. On this news, the price of Flex stock fell $3.61 per share, or more than 21%, to close at $13.03 per share on April 27, 2018.
Then on October 25, 2018, defendants fully disclosed the truth concerning Flex’s execution of customer contracts and admitted that Flex was so poorly executing on the Nike contract that it was winding down its Nike manufacturing operations after failing to sustainably manage the contract. The same day the Nike project was terminated, and just months after confirming the Company had material weaknesses in internal control, Flex’s CEO, Michael M. McNamara, abruptly retired with, as one market analyst observed, no “obvious choices for a replacement from the existing senior management.” On this news, the price of Flex stock fell 35% to close at $7.09 per share on October 26, 2018.