A class action lawsuit was filed against Cambium Networks Corp. (NASDAQ:CMBM) on May 22, 2024. The plaintiffs (shareholders) alleged that they bought CMBM stock at artificially inflated prices between May 8, 2023 and January 18, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Cambium Networks stock during that period can click here to learn about joining the lawsuit.
Cambium Networks is a wireless communications services provider. The company designs, develops, and manufactures multi-gigabit broadband and Wi-Fi infrastructure for business, residential, defense, and municipal applications worldwide.
The plaintiffs maintain that Cambium Networks and three of its current and/or former senior officers (Individual Defendants) deceived investors by lying and withholding vital information about the company’s business practices and prospects during the Class Period. Specifically, the Defendants are accused of omitting truthful information about inventory buildup and ancillary issues from SEC filings and related material.
The truth became clear in a series of events between August 1, 2023 and January 18, 2024. Importantly, on January 18, after the market closed, Cambium Networks released its preliminary Q4 FY23 results in which it slashed its revenue for the quarter to $40 million from the previous forecast of $40-$45 million. The company cited “aggressive Enterprise product discounts to clear excess channel inventories” as the reason for the shortfall.
Moreover, the company stated that its gross margin would come below the lower range of the guidance owing to write-downs of excess and obsolete inventory reserves. At the same time, CMBM announced that its CFO would exit his role effective February 2, 2024, due to the above-mentioned lapses.
However, in a press release at the beginning of the Class Period, the company mentioned that it “delivered an outstanding gross margin and strong operating profit due to improved product mix and tight cost controls.” Additionally, in a quarterly report filed in May 2023, the company assured that its disclosure controls and procedures were effective.
As per the class action lawsuit, Cambium Networks caused its shares to trade at artificially inflated prices by knowingly and recklessly misleading investors about the company’s business practices during the Class Period.
Notably, CMBM stock has plunged over 80% in the past year, causing massive damages to shareholders’ returns.
