Telefonaktiebolaget LM Ericsson
- Company Name
- Telefonaktiebolaget LM Ericsson
- Stock Symbol
- Class Period
- April 8, 2013 to July 17, 2017
- Motion Deadline
- June 5, 2018
The complaint charges Ericsson and certain of its officers with violations of the Securities Exchange Act of 1934. Ericsson provides computer networking hardware, software and related services to telecommunications companies around the world. Services provided by the Company include systems integration, network rollouts and consulting projects that are often structured as multi-year contracts. In 2015, revenue from services accounted for more than half of the Company’s total revenues.
During the Class Period, defendants issued materially false and misleading statements regarding Ericsson’s financial statements, claiming that its financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”). However, defendants had violated IFRS by materially overstating service revenues and improperly delaying the recognition of at least $1 billion in expenses on Ericsson’s long-term service project contracts. As a result of these false statements, the price of Ericsson American Depositary Shares (“ADSs”) was artificially inflated during the Class Period to as high as $14 per ADS.
The Company’s improper accounting on the long-term service project contracts and/or the associated material impact on Ericsson’s financial performance was revealed through a series of disappointing financial results beginning in April 2016 and culminating on July 18, 2017, when the Company reported its second quarter 2017 results and revealed that it had identified 42 long-term service contracts to date with total annual sales of almost $1 billion that Ericsson would exit, renegotiate or transform. On this news, the price of Ericsson ADSs fell $1.21 per share, or more than 16%, to close at $6.07 per ADS on July 18, 2017.