LDK Solar Company Ltd. ("LDK" or the Company) manufactures multicrystalline solar wafers, which are the principal raw material used to produce solar cells.
Several purported class action Complaints have been filed in the U.S. District Courts for the Southern District of New York and Northern District of California. The first filed Complaint, Tsang v. LDK Solar Company, Ltd., was filed on October 9, 2007, in the U.S. District Court for the Southern District of California. The Complaint alleges violations of federal securities laws, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, including allegations of issuing a series of false and material misrepresentations to the market which had the effect of artificially inflating the market price of the Company's publicly traded securities. By Court order, on December 14, 2007, the case was transferred to the Northern District of California. The case was then listed as a member case in the pending Northern District of California action, In re LDK Solar Securities Litigation, 07-CV-05182.
According to the Complaint filed on the October 9, 2007, in U.S. District Court for the Northern District of California, the class action was commenced on behalf of purchasers of LDK American Depositary Shares during the period from August 1, 2007 to October 3, 2007. Specifically, the Complaint charges LDK and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The Complaint alleges that throughout the Class Period, Defendants concealed the full extent of how badly flawed the Company’s internal controls were, preventing it from accurately measuring or reporting its inventory. As a result, the Company’s inventories were overstated by an estimated 25%, causing inflation in LDK’s assets, earnings and earnings per share reported during the Class Period.
On October 3, 2007, LDK’s share price fell almost 25% following a report that LDK’s financial controller had resigned, stating that the Company lacked internal controls and that the Company’s reported 1,000 tonne inventory of polysilicon was overstated by 25%. LDK’s former controller, Charley Situ, reported these discrepancies to both the U.S. Securities and Exchange Commission and the Company’s external auditor, KPMG. LDK could not deny or confirm Situ’s allegations on October 3, 2007, but promised to investigate and issue a further statement. The Company has since stated it will have an independent outside auditor investigate Situ’s allegations. The Company’s ADSs, which traded as high as $76.75 on September 27, 2007, plummeted $16.66, or 24.39%, to close at $51.65 on October 3, 2007. The ADSs continued to decline in after-hours trading, falling to $47.49.
The Complaint alleges that Defendants’ Class Period statements describing LDK’s business fundamentals, financial results and continued sales and earnings growth potential were false and misleading as: (a) Defendants had overstated LDK’s inventory of polysilicon prior to and during the Class Period and those false statements remained alive in the market during the Class Period; and (b) due to the Company’s inventory of polysilicon being overstated, the Company’s reported earnings and earnings per share prior to and during the Class Period were false and those false statements remained alive in the market during the Class Period.
On January 4, 2008, the Court entered the Order appointing Lead Plaintiff. On January 22, 2008, an order to transfer actions 07cv8766(JGK) and 07cv9745(JGK) to the Northern District of California as related to 07cv8766(JGK) was entered. Furthermore, on February 8, 2008, the Court entered an Order granting the motion to appoint Cohen, Milstein, Hausfield & Toll, P.L.L.C. as lead Counsel. On March 10, 2008, the lead Plaintiff filed a Consolidated Class Action Complaint. The Defendants responded by filing a motion to dismiss the lead Plaintiff's Consolidated Class Action Complaint.
On May 29, 2008, U.S. District Judge William Alsup denied the Defendants’ motion to dismiss.
According to the transferred action, a stipulation and extending time to answer consolidated class action Complaint was filed by LDK and several individuals on June 12, 2008.
Plaintiffs filed a Motion for Class Certification on August 28, 2008. On January 28, 2009, the Court issued an Order granting Plaintiff’s motion for Class Certification.
The parties entered into a Stipulation of Settlement on February 9, 2010. On February 17, the Court granted preliminary approval of the Settlement. The Court granted final approval of the Settlement on June 22. On July 29, the Court issued an Order approving Attorneys' Fees and Expenses. On December 17, the Court issued an Order authorizing Distribution of the Settlement fund.
