This shareholder derivative action is brought on behalf of ChargePoint against certain officers and members of the Company’s Board for breaches of their fiduciary duties between at least June 1, 2023 and November 16, 2023, inclusive (the “Relevant Period”) and for violation of the federal securities laws caused by the issuance of materially false and misleading statements issued, or caused to be issued, by the Individual Defendants in the Company’s SEC filings and other public statements. The Individual Defendants’ wrongdoing has exposed the Company to massive potential liability to the class, as well as the significant defense costs in the Securities Class Action, as set forth below.
ChargePoint, a Delaware corporation based in California, offers electric vehicle charging infrastructure. The Company provides hardware, software, and services for residential, commercial, and public charging stations.
It is alleged that throughout the Relevant Period, the Individual Defendants disseminated materially false and misleading statements, concealing from the public that: (i) ChargePoint was incurring higher component costs and experiencing supply overruns for its first generation DC charging products; (ii) the Company was likely to incur impairment charges; (iii) the Company would experience reduced profitability; and (iv) as a result of the foregoing, the Individual Defendants’ positive statements regarding the Company’s business, operations, and prospects lacked a reasonable basis.
On September 6, 2023, after the market closed, ChargePoint reported its financial results for the second quarter of fiscal year 2024, including a “$28.0 million, or 19 percentage point, inventory impairment charge,” resulting in a second quarter GAAP gross margin of 1%, down from 17% in the same quarter of the prior year. The Company explained that the “inventory impairment charge was taken to address legacy supply chain-related costs and supply overruns on a particular DC product.” On this news, the price of ChargePoint’s stock declined 11% in one day, closing at $6.29 per share on September 7, 2023.
On November 16, 2023, after the market closed, ChargePoint announced preliminary financial results for the third quarter of fiscal year 2024, including an “additional non-cash inventory impairment charge” of $42 million “related to product transitions and to better align inventory with current demand” that would result in a “GAAP gross margin of negative 23% to negative 21%.” The Company further indicated that it would fail to meet its revenue expectations of $150 to $165 million, reporting instead a range of $108 million to $113 million. Further, the Company announced the replacement of its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), effective immediately. On this news, the price of ChargePoint’s stock declined 35% in one day, closing at $2.02 per share on November 17, 2023.
On November 29, 2023, the Securities Class Action was filed against the Company, its CEO, and its CFO, exposing the Company to massive class-wide liability.
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