ON SEMICONDUCTOR SHAREHOLDER ACTION REMINDER
- None.
- The complaint alleges that ON Semiconductor and its executives violated federal securities laws by making false and/or misleading statements about revenues from reported LTSAs and customer demand.
- Investors learned the truth on October 30, 2023.
Insights
The announcement of a securities class action against ON Semiconductor Corporation presents significant legal implications for the company and its investors. The allegations suggest potential violations of federal securities laws, which hinge upon the veracity of the company's statements regarding Long-Term Supply Agreements (LTSAs). If the company misrepresented the certainty of revenues from these LTSAs, there could be material consequences. The legal process will likely involve a thorough examination of the communication between ON Semiconductor and its investors, particularly scrutinizing how the LTSAs were presented in financial disclosures.
Investors are typically reliant on the information provided by companies to make informed decisions. Should the allegations prove true, it would indicate a breach of trust and could lead to damages awarded to the affected investors. However, the outcome of such litigation is uncertain and can be protracted, often taking years to resolve. During this period, the company could face reputational damage, potential financial penalties and operational distractions, all of which can impact its stock performance and investor confidence.
The claims against ON Semiconductor may have a tangible impact on the company's financial health. If the litigation results in significant settlements or fines, it could materially affect the company's earnings and cash flow. Additionally, the costs associated with defending against the claims could be substantial. Investors and analysts will need to monitor this situation closely, as the outcome could lead to revisions in earnings forecasts and potentially alter the investment thesis for the stock.
Furthermore, the stock market typically reacts negatively to uncertainty and risk associated with legal proceedings. The mere announcement of the investigation and the subsequent class action could lead to volatility in ON Semiconductor's stock price. Market participants will be observing the company's forthcoming financial statements and disclosures for any adjustments or provisions related to the litigation, which could provide further insights into the potential financial impact.
The semiconductor industry is characterized by its cyclical nature and sensitivity to macroeconomic conditions. The allegations that ON Semiconductor may have misled investors about the predictability and sustainability of its growth, particularly through LTSAs, could suggest a broader industry impact. If ON Semiconductor is found to have engaged in practices that are not industry norm, it could lead to increased scrutiny of similar practices at other firms within the sector.
Competitors may also be affected as investors and regulators increase their focus on the validity and stability of LTSAs across the industry. This could lead to a shift in how such agreements are structured and disclosed, with potential implications for revenue recognition and forecasting practices. The situation underscores the importance of transparency and accurate reporting in maintaining investor confidence and the smooth functioning of capital markets, especially in industries reliant on long-term contracts for revenue generation.
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As detailed below, the complaint alleges that the Company and its executives violated federal securities laws by making false and/or misleading statements and/or failing to disclose that: (1) revenues from billions of dollars in reported LTSAs were "committed" and "locked in," and were effectively certain to be obtained by the Company when, in fact, the Company could and would abrogate the LTSAs at a customer's request; (2) LTSAs provided "predictable" and "sustainable" performance to drive the Company's growth, even in tough macroeconomic conditions, when, in fact, they would be modified or eliminated as conditions changed; and (3) Defendants had "good visibility" into customer demand when, in fact, demand could be reduced on short notice, even where LTSAs were in effect.
On October 30, 2023, investors learned the truth about the purported benefits of the Company's LTSA strategy and the achievability of projected revenue from the Company's products subject to LTSAs, when ON Semiconductor announced its third quarter 2023 financial results. During the accompanying investor earnings call held that same day, Defendant El-Khoury, in his opening remarks, revealed that ON Semiconductor would miss its
On this news, the price of ON Semiconductor common stock plummeted
The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.
Faruqi & Faruqi, LLP also encourages anyone with information regarding onsemi's conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
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FAQ
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