Canadian Solar Inc, a solar products company whose manufacturing operations are mainly in China, has won the dismissal of a U.S. lawsuit accusing it of misleading shareholders about its finances before raising more than $100 million in a 2009 stock offering.
U.S. District Judge Robert Sweet in Manhattan, who had dismissed an earlier version of the lawsuit last March, said the plaintiff shareholders failed to show that Canadian Solar made any materially false statements, including over transactions involving one customer that later prompted a restatement.
Shareholders said Canadian Solar intentionally recorded sales to the customer improperly on its books for the third quarter of 2009 in a bid to prop up the stock offering.
But on June 1, 2010, they said Canadian Solar "stunned" investors by announcing it had received a U.S. Securities and Exchange Commission subpoena and that it had begun an internal investigation into its results, which it later decided to revise.
Several individual shareholders sued Canadian Solar, Chief Executive Shawn Qu and former chief financial officer Arthur Chien on behalf of a proposed class for the period from Oct. 13, 2009, when the stock offering was announced, to June 1, 2010.
Canadian Solar shares fell 42 percent to $10.17 on the day after the class period ended, from $17.54 when the period began. Its shares closed at $3.46 on Thursday.
But Sweet said the shareholders' reliance on several confidential witnesses to establish what Canadian Solar knew in its dealings with the customer did not remedy the problems with the earlier complaint, including failing to show that the company intended to deceive the shareholders.
"Efforts to complete a secondary public offering do not entail concrete benefits sufficient to demonstrate motive," Sweet wrote. The judge also said the plaintiffs did not show that the company knew or had reason to know there were problems with its internal controls.