Following Suntech’s announcement that it has possibly being caught up in a half a billion Euros the company is facing a third class action suit from investors. The suit once again originates from the USA notice was given by Glancy Binkow & Goldberg LLP, representing investors of Suntech Power Holdings, has filed a class action lawsuit in the United States District Court on behalf of a group of investors purchased the American Depositary Shares of Suntech between August 18, 2010 and July 30, 2012, inclusive.
The Complaint charges Suntech and certain of the Company’s executive officers with violations of federal securities laws. The Complaint alleges that throughout the Class Period, the defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about Suntech’s business, operations and prospects. Specifically, the Complaint alleges that the defendants made false and/or misleading statements and/or failed to disclose: (1) that Suntech had not been pledged EURO 560.0 million in German government bonds from GSF Capital Pte Ltd., in connection with its May 2010 financing arrangement with the China Development Bank; (2) that the Company lacked internal and financial controls; and (3) that, as a result, the Company's financial statements were materially false and misleading at all relevant times.
On July 30, 2012 the Company disclosed that it was conducting an investigation into the security interest that Suntech purportedly received in May 2010 from GSF Capital Pte Ltd, the parent of the general partner of Global Solar Fund, S.C.A, Sicar (“GSF”), an investment fund created to make investments in private companies that own or develop projects in the solar energy sector that had 80% of its share equity owned by Suntech. According to the Company, outside counsel that had been hired as part of Suntech's initiative to monetize its investment in GSF had noted certain facts and circumstances suggesting that the German government bonds in the amount of EURO 560.0 million purportedly pledged to the Company may not have ever existed. The Company further disclosed that it had filed legal claims against relevant parties in multiple jurisdictions to assert control of GSF and its assets.
On this news, shares of the Company declined $0.23 per share, or 14.65%, to close on July 30, 2012, at $1.34 per share, on unusually heavy volume, and further declined another $0.21, or 15.67%, to close on July 31, 2012, at $1.13 per share, also on unusually heavy volume. The complainants are seeking to recover damages from the decline of their investment that the fraud case has brought to the company’s fortunes.
Suntech denies any management involvement in the investment failure. The company stated that daily activities would not be impacted and has announced that it has filed claims of its own against un-named parties and reassured investors that the findings were not conclusive and any investigations were still to be concluded.
Suntech is currently assessing the potential impact of the suspected fraud on its consolidated financial statements. The Company noted that it may delay its earnings announcement for the second quarter of 2012 until it completes the investigation and financial assessment. However, the Company plans to publish key operating metrics in the week beginning the 20th of August, 2012 and to inform investors of any material developments in a timely manner.