Methode Electronics Inc. (NYSE: MEI), a Chicago-based manufacturer of custom-engineered parts, is facing a securities fraud class action lawsuit filed in the United States District Court for the Northern District of Illinois. The lawsuit, Marie Salem v. Methode Electronics Inc., et al., alleges that the company and former executives engaged in securities fraud, affecting investors who purchased or acquired Methode shares between June 23, 2022, and March 6, 2024.
The legal action centers on Methode's transition from producing low-mix, high-margin parts to specialized components for electric vehicle manufacturers. According to the lawsuit, the company allegedly made false and misleading statements about its operations and prospects during this transition period. Specifically, the suit claims Methode failed to disclose operational, logistics, and personnel problems that plagued its Monterrey facility, including turnover, poor operational decisions, vendor issues, and supply-chain disruptions.
These undisclosed challenges reportedly led to production delays, inventory shortages, increased costs, and delayed product launches. The lawsuit contends that the company's representations about its business, operations, and prospects were materially false, misleading, or lacked a reasonable basis throughout the relevant period.
The impact of these alleged misrepresentations began to surface in March 2023 when Methode's automotive unit missed sales targets and lowered its full-year earnings guidance, causing a significant drop in stock price. Subsequent earnings misses further affected the stock negatively. The situation culminated in March 2024 when Methode announced an $11 million loss from operations in its automotive segment and withdrew its prior guidance, citing "operational challenges" at the Monterrey facility.
This class action lawsuit is significant for Methode investors and the broader market as it highlights the potential risks associated with corporate transitions and the importance of transparent communication with shareholders. It also underscores the legal consequences companies may face for allegedly misleading investors about material business challenges.
Investors who have suffered losses are being encouraged to contact Kessler Topaz Meltzer & Check, LLP, the law firm handling the case, to learn more about their rights and the possibility of serving as a lead plaintiff. The deadline for investors to take action is October 25, 2024. This case serves as a reminder of the critical role of accurate and timely disclosure in maintaining investor trust and the potential financial and reputational risks companies face when failing to meet these obligations.
