Apple sensor supplier InvenSense is facing a class-action lawsuit filed by investors accusing the company of defrauding investors by not revealing the true terms of its deals with Apple and Samsung, reports Silicon Beat. InvenSense recently joined Apple's supply chain, producing gyroscopes and accelerometers for the iPhone 6 and 6 Plus.
In the lawsuit, investors accuse InvenSense CEO Alan Krock of providing misleading guidance when he discussed a large new customer during the company's earnings conference call in July 2014.
"Instead of revealing the true condition of the company and its prospects, defendants hid those facts from investors and chose to issue strong guidance and paint a picture of a bright future with a new mega-customer," the complaint states.
Investors believed the new customer to be Apple and increased their stock holdings based on this assumption. During this buying frenzy, InvenSense insiders reportedly sold off their shares, making more than $5.3 million at a time when the price of InvenSense's stock was climbing.
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Investors were surprised when InvenSense's gross margins dropped 11 percentage points in the following quarter despite this supposed lucrative Apple contract, and the company's share price quickly fell 20 percent. Plaintiffs in the case assert this decline in the company's financial state was the result of overly generous supplier deals with Apple and Samsung, as well as manufacturing problems that delayed component shipments. The company's failure to disclose these "sweetheart deals" is the basis for the class-action lawsuit.
InvenSense isn't the first supplier to face financial troubles after inking a deal with Apple. Materials manufacturer GT Advanced last year filed for bankruptcy following a failed manufacturer agreement with Apple to supply sapphire for future Apple devices.
Top Rated Comments
If I beat the market, I'm a genius that saw something no one else did!
If the market beats me, I must have been lied to: sue!!
So investors who tried to "read between the lines" are suing because they failed to guess right? Good luck with that one.
The comparison to GTAT seems inevitable, but off base. InvenSense is selling product to Apple. GTAT never did.
I think you are getting it right. The plaintiffs have to show that the company provided investors with deliberately misleading or inaccurate information. The insider trading claim is also difficult to prove without evidence that insiders traded outside of the trading plans they are required to file with the SEC. The problem with most insider trading claims is that this evidence is generally absent. Insiders are always trading so it's easy to make strictly circumstantial claims like these but they don't count for a hill of beans.
Worst comment of 2015?
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This article also fails to mention what their profit was.
Also, their margin fell from 47% to 36%. This really doesn't sound like the sky falling to me. So long as they're selling at least 31% more product, they've increased their profit.