Shoals Technologies Group, Inc. Securities Lawsuit Investigation

Shamis & Gentile P.A., a law firm that advocates for investors who are victims of securities fraud, is investigating potential claims against Shoals Technologies Group, Inc. (SHLS).

If you purchased or held Shoals Technologies Group securities and suffered losses, you may be eligible to join this securities investigation and seek compensation.

About Shoals Technologies Group

Shoals Technologies Group, Inc., headquartered in Portland, Tennessee, and incorporated in Delaware, is a provider of electrical balance of system (EBOS) solutions for solar energy projects.

Shoals generates a significant portion of its revenue from these EBOS components, which are supported by product warranties. The company has frequently highlighted its commitment to stringent product standards in its public disclosures and filings.

What’s being investigated

Attorneys are reviewing potential claims on behalf of long-term Shoals stockholders following a class action complaint filed on March 21, 2024 and later consolidated on May 24, 2024 with other related actions.

The investigation centers on whether the board of directors may have breached their fiduciary duties in connection with alleged product defects and related disclosures.

The complaint alleges that Shoals failed to timely disclose widespread issues involving “shrinkback”, a defect where wire insulation pulls back at connection points, exposing copper conduit.

The complaint further alleges that Shoals learned of shrinkback issues as early as March 2022 but did not inform investors until later. It is alleged that Shoals installed defective wire harnesses in at least 300 solar fields, representing about 30% of harnesses manufactured between 2020 and 2022.

When the company ultimately disclosed the full scope of the problem and associated warranty charges, its stock price fell sharply.

Key timeline

• March 2022: Shoals allegedly learns of exposed copper conduit due to shrinkback in EBOS wire harnesses at a customer’s solar field in Arizona. Investors allege this marks the start of undisclosed, widespread defect awareness.
• Throughout 2022: Shoals reportedly becomes aware of numerous customers experiencing similar shrinkback issues, according to the complaint.
• May 8, 2023: Shoals files its first quarter 2023 Form 10-Q with the SEC, disclosing for the first time a potential issue with wire harnesses exhibiting shrinkback. Shoals states it has “substantially ceased use of the related wire.”
• August 1, 2023: Shoals files its second quarter 2023 Form 10-Q, reporting a $9.3 million warranty liability related to shrinkback. On an analyst call, the CFO states the charge is believed “adequate” for remediation.
• November 7, 2023: Shoals discloses an additional $50.2 million warranty expense for the shrinkback issue and estimates total remediation costs between $59.7 million and $184.9 million. The company’s stock price falls more than 20% over two days, erasing approximately $550 million in market capitalization.

Why investors may be concerned

The complaint alleges that Shoals may have made misleading statements or omissions regarding the quality of its EBOS products and the timing and extent of known defects. Investors allege that Shoals understated warranty liabilities and cost of revenue, potentially resulting in inaccurate financial reporting.

Stockholders also argue that the board of directors may have failed in their oversight duties by not establishing or maintaining adequate systems to monitor and disclose mission-critical product risks. These alleged governance lapses could implicate the board’s fiduciary responsibilities to the company and its shareholders.

Your Rights and Next Steps

This is an ongoing investigation into potential breaches of fiduciary duty and securities law violations at Shoals Technologies Group. If you owned Shoals stock during the relevant class period and suffered losses, you may have rights as a shareholder.

Potential next steps:

• Derivative actions: As a stockholder, you may have the right to pursue a derivative lawsuit on behalf of the company if you believe the board or officers breached their fiduciary duties.
• Class action participation: If a class is certified, affected investors may share in any recovery. You may also seek to be appointed lead plaintiff by the court, but must act by the deadline.
• Information rights: Shareholders may request information about the company’s response, governance practices, and remediation efforts.

Participation in these actions is voluntary, and no outcome is guaranteed.

You May Be Entitled to Compensation

Securities investigations are time-sensitive. If you purchased or held Shoals Technologies Group shares during the class period and experienced losses, you may be eligible to join the investigation.

To protect your rights and preserve potential claims, complete the form below to join the investigation and receive updates.