Securities class action suit filed against electronic design automation firm Mentor Graphics Corp.

A securities class action suit was recently filed against an electronic design automation firm following allegations that it violated federal securities laws.

The lawsuit against Mentor Graphics Corp. was filed in the U.S. District Court for the District of Oregon on behalf of investors who purchased shares in the company during the class period between Aug. 21, 2014 and Nov. 19, 2015, according to a press release. Mentor Graphics is a multinational corporation that provides electronic design automation solutions to engineering and electronics firms. The company offers both software and hardware to help buyers with design automation. Its products can be used for design, automation and testing.

Lawsuit claims that demand for products not as it seemed
The class action compliant claims that Mentor Graphics released false and misleading statements and/or failed to disclose certain information to its investors, a press release noted. Specifically, the lawsuit alleges that the company did not inform investors that its customers were pushing back or turning down extended license agreements. In addition, the class action filing claims the company failed to inform investors that customers were demanding “price concessions” due to an abnormal level of mergers and acquisitions in 2015.

The class action suit goes on to allege that the defendants failed to disclose that demand for its emulation products would be hampered by the pending arrival of competitive solutions. In addition, it claims that the company had stated that it would be “a long time before any competitor could release a competitive virtual emulation product.”

“Mentor Graphics reduced its 2015 fourth quarter fiscal outlook.”

The lawsuit claims that early customer contract renewals and similar bookings were also not as they seemed. The defendants claimed these were the result of strong demand. However, the lawsuit alleges that in fact, this was not the case. These renewals and related bookings moved expected bookings and revenue from future to earlier periods. The class action filing claims that as a result of the aforementioned allegations, the company’s public statements were materially false and misleading during the relevant class period. It goes on to allege that when these facts came to light, investors suffered damages.

Disappointing financial results impact Mentor Graphics’ stock
On Nov. 19, 2015, Mentor Graphics released third quarter financial results that were less positive than expected. The company subsequently reduced its fourth quarter fiscal outlook. It cut its revenue projections for the final three months of 2015 by $104 million. That wasn’t the only discouraging news Mentor Graphics had for its investors, though. The company went on to announce that bookings for the three months ending Oct. 31, 2015, dropped by about 20 percent compared with the same quarter the year prior. This drop was connected to a decrease in term license contract renewals.

On this news, Mentor Graphics stock fell 36 percent to close at $17.85 per share on Nov. 19.

For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or info@battea.com.