Methode Electronics Inc. Has Been Implicated In A Securities Fraud Class Action Lawsuit – Here’s How Investors Can Get More Information

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By Meg Flippin, Benzinga

Methode Electronics Inc. (NYSE: MEI) is under the spotlight amid a class action lawsuit filed in the United States District Court for the Northern District of Illinois against the company and former executives for allegedly engaging in securities fraud. The action, Marie Salem v. Methode Electronics Inc., et al., impacts investors who purchased or acquired shares of Methode Electronics between June 23, 2022, and Mar. 6, 2024.

Methode is a Chicago-based designer and manufacturer of custom-engineered parts used in transportation, cloud computing infrastructure, construction, consumer appliances and medical devices. Most of its revenue is derived from its automotive segment, which had reportedly been humming along until 2020. With car manufacturers using fewer designs featuring buttons and knobs, favoring display screens and infotainment, Methode shifted its focus.

Methode opted to move away from its low-mix but high-margin parts business into specialized components targeted at electric vehicle manufacturers instead of traditional car companies, which appeared to promise to bring higher margins and more sales – but that transition proved to be rocky, and the company allegedly hid its woes from investors, leading to the class action lawsuit.

Transition To Speciality Components Rocky

According to the lawsuit, during the transition period, the company made materially false and/or misleading statements and failed to disclose material adverse facts about operations and its prospects. The lawsuit points specifically to the company misleading investors or failing to disclose to them the operational, logistics and personnel problems that plagued the transition.

What’s more, the lawsuit contends Methode did not disclose setbacks at its Monterrey facility during the transition caused by turnover, poor operational decisions, issues with vendors and supply-chain snafus that led to production planning delays, inventory shortages and what the lawsuit calls “botched” execution of the company’s plan. On top of that, the company incurred increased costs and delayed launches as it attempted to retool the plant to produce the specialty components. All told, the lawsuit states the “company’s business, operations and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.”

The lawsuit explains that this all started showing up in March 2023 when the company’s automotive unit missed sales targets for the third quarter and lowered its full-year 2023 diluted earnings per share guidance, sending the stock down 13% over the course of multiple trading sessions. The bloodletting didn’t stop there, with the company announcing a series of earnings misses in the subsequent quarters which weighed on the stock.

Finally, in March 2024 when reporting its third-quarter 2024 results, Methode announced its automotive segment suffered an $11 million loss from operations, prompting it to withdraw its prior guidance citing “operational challenges” at its Monterrey facility. The company told investors its prior guidance should no longer be relied upon. To improve operations, the company announced it was cutting its headcount and discretionary expenses and is unloading non-core assets.

On a conference call at the time to discuss results, the company’s new chief executive officer, Avinash Avula, said Methode’s sales for the third quarter were down $21 million year-over-year “entirely [attributable to] our Auto segment.” That drove the stock down about 31%.

Here’s How Methode Investors With Losses Can Find Out More Information About Their Rights

Kessler Topaz Meltzer & Check, LLP has earned a reputation for prosecuting class actions in state and federal courts throughout the United States and globally. It reports that it has successfully recovered billions of dollars for victims of fraud and other corporate misconduct. The firm is encouraging Methode investors who have suffered significant losses to directly contact it for more information.

To potentially qualify as a lead plaintiff in the Methode class action lawsuit, investors must take action no later than October 25, 2024. They can move the court to serve as lead plaintiff either through Kessler Topaz Meltzer & Check, LLP, or other legal counsel. Alternatively, investors can choose to do nothing and remain as absent class members.

A lead plaintiff is a representative party who acts on behalf of all class members in the litigation. This individual or small group of investors typically has the largest financial interest and is considered adequate and typical of the proposed class of investors. The lead plaintiff also selects legal counsel to represent both the lead plaintiff and the class. If the court approves these attorneys, they become lead or class counsel. Applying to become a lead plaintiff does not affect an investor's ability to share in any recovery from the lawsuit.

CLICK HERE to submit your Methode losses or contact an attorney to discuss your rights:

Jonathan Naji, Esq. (484) 270-1453 or email at info@ktmc.com. Link also available here: https://www.ktmc.com/new-cases/methode-electronics-inc?utm_source=benzinga&utm_medium=article&utm_campaign=mei&mktm=bzb

Featured photo by Timothy Dykes on Unsplash.

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