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Oklahoma City, OK (May 31, 2019) – On May 28, 2019, a securities class action lawsuit was filed in the United States District Court for the Eastern District of Wisconsin against A.O. Smith Corporation (NYSE: AOS). The complaint alleges violations of federal securities laws, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, including allegations of issuing a series of material or false misrepresentations to the market which had the effect of artificially inflating the market price during the Class Period, which is July 26, 2016 through May 16, 2019. More specifically, the complaint alleges defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that: (1) A.O. Smith had undisclosed business connections and entanglements with Jiangsu UTP Supply Chain (“UTP”) through which it funneled up to 75% of its China product sales; (2) A.O. Smith had used UTP to engage in channel stuffing by artificially inflating inventories purportedly sold through distributors that were not based on consumer demand, thereby approximately doubling the normal level of inventory at such distributors; (3) A.O. Smith had used its UTP relationship to artificially inflate the sales figures it reported to investors by as much as 8% and to conceal worsening sales trends that A.O. Smith was experiencing in China; (4) A.O. Smith’s sales growth had been primarily in lower margin products as its higher priced products were being undercut by competition in “second-tier” Chinese cities, causing the Company to experience significant market pressures; (5) A.O. Smith had increased its cash reserves in China to over $530 million in furtherance of its channel stuffing and sales manipulation scheme, encumbering A.O. Smith’s ability to repatriate the cash for use for capital expenditures; and (6) as a result, A.O. Smith’s public statements were materially false and misleading at all relevant times.
On May 16, 2019, analyst firm J Capital Research USA LLC (“J Capital”) published a report alleging that A.O. Smith used several manipulative practices to show higher sales and earnings in its China operations. The report stated that A.O. Smith had undisclosed business relationships and entanglements with UTP, accounting for up to 75% of the Company’s product sales in China. The report also questioned whether A.O. Smith had unencumbered access to more than $530 million in cash on hand it claimed to hold in China. On this news, A.O. Smith’s share price fell from $48.14 per share on May 15, 2019 to a closing price of $45.12 on May 16, 2019: a $3.02 or a 6.27% drop.
Plaintiff seeks to recover damages on behalf of all A.O. Smith Corporation shareholders who purchased common stock during the Class Period and are therefore a member of the Class as described above. You may move the Court no later than Monday, July 29, 2019 to serve as a lead plaintiff for the entire Class. However, in order to do so, you must meet certain legal requirements pursuant to the Private Securities Litigation Reform Act of 1995.
If you wish to discuss this action, obtain further information and participate in this or any other securities litigation, or should you have any questions or concerns regarding this notice or preservation of your rights, please contact: Robin Hester at email@example.com