Daqo New Energy's Subsidiary Xinjiang Daqo Provides Latest Update on its Litigation Event

Rhea-AI Summary

Daqo New Energy Corp. (NYSE: DQ) has provided an update on a litigation event involving its subsidiary Xinjiang Daqo. The case stems from a contract dispute with Xinjiang Xian'an New Materials Co., and Xinjiang Dengbo New Energy Co., , who previously provided silicon core processing services to Xinjiang Daqo. The first instance court's verdict has ordered Xinjiang Daqo to:

1. Affirm termination of the business cooperation agreement as of December 31, 2023
2. Compensate the plaintiffs RMB3.06 million for losses from rents and employee salaries
3. Pay RMB100,000 in attorney fees

The court rejected claims for consequential losses. As the appeal period is still open, the final impact on Xinjiang Daqo remains uncertain pending the final verdict.

Positive

• Court rejected plaintiffs' claims for compensation of consequential losses
• Compensation ordered (RMB3.16 million) is significantly lower than the plaintiffs' initial claim (RMB1,847.8 million)

Negative

• Xinjiang Daqo ordered to pay RMB3.06 million in compensation plus RMB100,000 in attorney fees
• Termination of business cooperation agreement with silicon core processing service providers
• Potential for appeal could lead to further legal costs and uncertainty

Insights

Legal Expert

The recent court ruling in the contract dispute between Xinjiang Daqo and Xinjiang Xian'an could be a relief for stakeholders who were worried about the high compensation claims. The court found that Xinjiang Daqo is required to pay a relatively modest sum of RMB3.06 million for rents and employee salaries, much lower than the initial claim of RMB1,958.5 million. This outcome suggests that the court found the plaintiffs' claims for consequential losses were not substantiated.

It's important to note that the decision is still subject to appeal. The appeal could potentially change the financial outcome, but as it stands, the ruling significantly mitigates the financial risks associated with this litigation. Investors should be aware, however, that legal proceedings can be lengthy and unpredictable. An appeal could also extend the period of uncertainty.

From a legal perspective, the low award amount compared to the initial claim may indicate strong defenses presented by Xinjiang Daqo. The rejection of the larger claim might also discourage other potential litigants from pursuing similarly high compensation claims against the company.

Financial Analyst

From a financial standpoint, the court's ruling in favor of a smaller compensation amount is a positive development for Xinjiang Daqo. RMB3.06 million, plus attorney fees of RMB100,000, is a manageable expense for a company of Daqo's size. To put this in perspective, the company had cash and cash equivalents of over USD 1 billion as of its last financial report.

While the outcome is favorable for now, the pending appeal introduces a level of uncertainty. Investors should keep an eye on further announcements from Xinjiang Daqo regarding the appeal process. Should the final ruling remain unchanged, the financial impact will be minimal, allowing the company to allocate its resources towards its core operations instead of legal fees.

Long-term investors might find comfort in the resilience shown by the company in defending against high claims. This outcome demonstrates effective legal and financial management, which can be a reassuring factor for shareholders concerned about potential legal liabilities.

SHANGHAI, July 17, 2024 /PRNewswire/ -- Daqo New Energy Corp. (NYSE: DQ) ("Daqo New Energy," the "Company" or "we"), a leading manufacturer of high-purity polysilicon for the global solar PV industry, today announced that its subsidiary Xinjiang Daqo has provided an update on its litigation event.  

In January 2024, Xinjiang Daqo received a court notice relating to a contract dispute lawsuit filed against it by Xinjiang Xian'an New Materials Co., Ltd. ("Xinjiang Xian'an") and its affiliate, Xinjiang Dengbo New Energy Co., Ltd. ("Xinjiang Dengbo", together with Xinjiang Xian'an, "the plaintiffs"). The plaintiffs previously provided silicon core processing services to Xinjiang Daqo. They claimed that Xinjiang Daqo and its related companies breached the business cooperation agreement between Xinjiang Daqo and Xinjiang Xian'an, and requested for termination of the business cooperation agreement and compensation from Xinjiang Daqo for their economic losses of RMB1,958.5 million (which was later reduced to RMB1,847.8 million). This litigation was previously disclosed in our annual report on Form 20-F for the year ended December 31, 2023 filed with the Securities and Exchange Commission on April 29, 2024.

We have recently received the first instance court's verdict. The court affirmed termination of the business cooperation agreement on December 31, 2023, and ordered Xinjiang Daqo to compensate the plaintiffs for their losses arising from rents and employee salaries in the amount of RMB3.06 million, plus attorney fees of RMB100,000. On the other hand, the court rejected the plaintiffs' claims for compensation of their consequential losses. As we are still within the appeal period, the litigation's impact on Xinjiang Daqo will be contingent upon the final verdict.

About Daqo New Energy Corp.

Daqo New Energy Corp. (NYSE: DQ) ("Daqo" or the "Company") is a leading manufacturer of high-purity polysilicon for the global solar PV industry. Founded in 2007, the Company manufactures and sells high-purity polysilicon to photovoltaic product manufactures, who further process the polysilicon into ingots, wafers, cells and modules for solar power solutions. The Company has a total polysilicon nameplate capacity of 205,000 metric tons and is one of the world's lowest cost producers of high-purity polysilicon.

For more information, please visit www.dqsolar.com.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "might," "guidance" and similar statements. The Company may also make written or oral forward-looking statements in its reports filed or furnished to the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, all of which are difficult or impossible to predict accurately and many of which are beyond the Company's control. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the demand for photovoltaic products and the development of photovoltaic technologies; global supply and demand for polysilicon; alternative technologies in cell manufacturing; the Company's ability to significantly expand its polysilicon production capacity and output; the reduction in or elimination of government subsidies and economic incentives for solar energy applications; and the Company's ability to lower its production costs. Further information regarding these and other risks is included in the reports or documents that the Company has filed with, or furnished to, the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date hereof, and the Company undertakes no duty to update such information or any forward-looking statement, except as required under applicable law.

 

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SOURCE Daqo New Energy Corp.

FAQ

What was the outcome of Xinjiang Daqo's recent litigation case?

The court ordered Xinjiang Daqo to pay RMB3.06 million in compensation for losses plus RMB100,000 in attorney fees, and affirmed the termination of the business cooperation agreement. However, the court rejected claims for consequential losses.

How much did the plaintiffs initially claim in damages against Xinjiang Daqo (DQ)?

The plaintiffs initially claimed RMB1,958.5 million in damages, which was later reduced to RMB1,847.8 million.

When was the business cooperation agreement between Xinjiang Daqo and the plaintiffs terminated?

The court affirmed the termination of the business cooperation agreement on December 31, 2023.

Is the litigation case against Xinjiang Daqo (DQ) fully resolved?

No, the case is not fully resolved as Xinjiang Daqo is still within the appeal period, and the final impact will depend on the ultimate verdict.