Methode Electronics Inc. (NYSE: MEI), a Chicago-based manufacturer known for its custom-engineered parts, is currently facing a class action lawsuit alleging securities fraud. Filed in the United States District Court for the Northern District of Illinois, the lawsuit accuses the company and its former executives of making false and misleading statements regarding its operations and future prospects. This legal action, titled Marie Salem v. Methode Electronics Inc., et al., specifically impacts investors who purchased or acquired Methode Electronics shares between June 23, 2022, and March 6, 2024.
The lawsuit alleges that Methode Electronics failed to disclose critical adverse facts about its operations during the aforementioned period. Notably, the company was transitioning from producing low-mix, high-margin parts to specialized components for electric vehicle manufacturers. According to the complaint, Methode Electronics concealed significant operational, logistics, and personnel challenges that hindered this transition. Issues such as high turnover, poor operational decisions, vendor problems, and supply-chain disruptions at its Monterrey facility reportedly led to production delays, inventory shortages, and increased costs, none of which were adequately disclosed to investors.
The repercussions of these alleged misrepresentations became apparent in March 2023 when Methode's automotive unit failed to meet sales targets for the third quarter and subsequently lowered its full-year 2023 earnings guidance. This announcement triggered a 13% drop in the company's stock over several trading sessions. The pattern of earnings misses continued in subsequent quarters, further depressing the stock price. The situation escalated in March 2024 when Methode reported an $11 million loss from operations in its automotive segment for the third quarter of fiscal 2024, leading to the withdrawal of prior guidance and a 31% stock price plunge.
The class action lawsuit offers affected investors a chance to seek compensation for potential financial losses attributed to the alleged securities fraud. Kessler Topaz Meltzer & Check, LLP, a law firm specializing in securities fraud cases, is urging investors who have suffered significant losses to consider their legal options. The deadline for investors to apply for the lead plaintiff role in the Methode class action lawsuit is October 25, 2024. This case underscores the critical need for corporate transparency and the legal avenues available to investors when companies allegedly engage in fraudulent practices leading to financial harm.
