NEW YORK–(COMMERCIAL THREAD)–Bragar Eagel & Squire, PC, a nationally recognized stockholder rights law firm, announces that a class action lawsuit has been filed against Generac Holdings, Inc. (“Generac” or the “Company”) ( NYSE: GNRC) in the United States District Court for Eastern Wisconsin on behalf of all individuals and entities who purchased or otherwise acquired Generac securities between April 29, 2021 and November 1, 2022, both dates inclusive (the “Term of the class”). Investors have until January 30, 2023 to apply to the Court to be named lead civil party in the case.
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This action stems from repeated misrepresentations by Generac and its senior executives that they concealed from investors a defective component at the heart of Generac’s solar energy products. That component, the “SnapRS”, was intended to perform an essential safety function by rapidly shutting down solar devices in certain dangerous situations. Instead of protecting consumers, the SnapRS would overheat, melt and, in some cases, cause fires.
The defendants knew that versions of SnapRS installed in thousands of homes were faulty and dangerous. Numerous consumers have filed complaints with regulators, and Generac’s business partners who have sold, installed and serviced Generac’s solar products have notified the company of the SnapRS defect.
Instead of warning investors and consumers, the Defendants continued to advertise the success and reliability of Generac’s solar energy products by quietly making minor changes to the SnapRS, including issuing a firmware update. After these changes failed to fix SnapRS, the Defendants continued to mislead investors.
Generac has relied on “channel partners” to sell, service and install its solar battery storage systems, including Power Home Solar, LLC d/b/a Pink Energy (“Pink Energy”), Baker Electric Home Energy , Posigen and Valley Solar. During the class period, Pink Energy was the largest of these partners, with operations in 15 states. Among other deceptions, Generac misled investors about its reliance on Pink Energy, falsely assuring investors that no single customer or partner drove more than 6% of its sales and that Generac had a large and diverse network of distribution partners.
Generac also misled investors about its financial condition by disregarding its liability for warranty claims arising from the defective SnapRS. By misrepresenting its warranty liability, Generac also overstated its earnings during the Class Term and falsely assured investors that the Company’s financial statements were prepared in accordance with Generally Accepted Accounting Principles (“GAAP”).
Investors first learned the truth about Generac’s defective SnapRS on August 1, 2022, when Pink Energy filed a lawsuit against Generac, revealing that the company’s “defective” SnapRS components caused millions of dollars in damages, resulting in to liabilities that threatened the solvency of Pink Energy (the “Pink Energy Complaint”). The revelations in the Pink Energy complaint caused Generac’s stock price to drop $3.31 per share. The liability created by the faulty SnapRS components eventually forced Pink Energy to file for bankruptcy on October 7, 2022.
In the wake of Pink Energy’s bankruptcy on October 19, 2022, Generac disclosed that it incurred “pre-tax charges totaling approximately $55 million, including approximately $37 million in clean energy product warranty issues and approximately $18 million in bad debt charges related to a clean energy customer that has filed for bankruptcy.” The $37 million charge in warranty fees appears to reflect Generac’s belated recognition of its increased liability to repair defective SnapRS units.The $18 million “bad debt expense” charge reflects claims owed by Pink Energy, and possibly other partners or customers burdened with defective SnapRS products, that would not have been paid. The October 19 disclosures caused Generac’s stock price to drop $37.44 per share, or 25%.
On November 2, 2022, Generac released earnings results for the third quarter of 2022 and lowered its sales forecast for its solar power business by about 40% for the remainder of the year. In a conference call with investors and analysts held the same day, Generac CEO Defendant Jagdfeld attributed the reduced guidance to the “loss of a major customer during the quarter, along with the specific warranty issue”—that is, the defective SnapRS component and the failure of Pink Energy resulting directly from that defect. Analysts expressed shock to learn how dependent Generac’s clean energy business was on Pink Energy, with several analysts noting that investors had not been informed of the significant concentration of that business with a single partner. As a result of these disclosures, Generac’s stock price fell $8.99 per share, or 8%.
Through this action, the Plaintiffs are seeking damages to compensate Generac shareholders for the Defendants’ misrepresentations as set forth herein.
If you have bought or otherwise acquired Generac stock and have suffered a loss, are a long-term shareholder, have information, want to learn more about these statements, or have any questions regarding this announcement or your rights or interests in connection therewith questions, please contact Brandon Walker or Melissa Fortunato by email at email@example.com, by phone at (212) 355-4648, or by by filling out this contact form. There are no costs or obligations for you.
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Bragar Eagel & Squire, PC is a nationally recognized law firm with offices in New York, California and South Carolina. The firm represents individual and institutional investors in commercial, securities, derivatives and other complex litigation in state and federal courts throughout the country. For more information about the company, please visit www.bespc.com. Advocate advertising. Previous results do not guarantee similar results.