A class action lawsuit was filed against Spire Global, Inc. (SPIR) by Levi & Korsinsky on August 20, 2024. The plaintiffs (shareholders) alleged that they bought SPIR stock at artificially inflated prices between March 6, 2024 and August 14, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Spire Global stock during that period can click here to learn about joining the lawsuit.
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Spire Global operates as an aerospace company that designs, builds, and operates the world’s largest multipurpose satellite constellation.
Spire Global also allows access to its data and enables customers to send their own applications via satellites for a subscription fee. The company’s tall claims about these services and the expected revenue from them are at the heart of the complaint.
Spire Global’s Misleading Claims
According to the lawsuit, Spire Global and two of its senior officers (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about the efficacy of certain internal controls and other issues from SEC filings and related material.
For instance, in the press release for Q4 FY23, Spire reported full year Fiscal 2023 revenue of $105.7 million, up 32% annually and in line with its targeted more than 30% annual growth rate. Further, in the annual report for FY23, the company noted that it is planning to launch a “space-as-a-service” business model in its Space Services Solution segment.
In the same report, Spire stated that it provides multiple project-based services to customers, encompassing multiple phases of the Space Services solution. In such cases, Spire accounts for each separate project-based deliverable as a separate performance obligation and assigns a price to them. The price is usually based on a cost-plus-margin method.
In contrast to the company’s disclosures, subsequent events (discussed below) revealed that Spire Global allegedly misled investors about its faulty revenue recognition methods and related revenue expectations and the lack of appropriate internal controls.
Plaintiffs’ Arguments
The plaintiffs maintain that the Defendants deceived investors by lying and withholding critical information about the company’s business practices and prospects during the Class Period. Importantly, the Defendants are accused of misleading investors about their revenue recognition techniques and lack of internal controls.
The information became clear after the markets closed on August 14, 2024, when Spire announced a delay in the filing of its Q2 FY24 financial results. The company attributed the delay to the ongoing review of its accounting practices and methods of revenue recognition related to the contracts in its Space Services Solution segment and related internal controls.
Furthermore, Spire Global noted that the contracts it was reviewing could impact annual revenues by $10 to $15 million and also potentially impact the gross profit. Following the news, SPIR stock plunged over 33.5% on August 15.
To conclude, Spire Global allegedly misled investors about the revenue expectations for some of its Space Services Solution contracts, resulting in the over-projecting of revenues and investor expectations. In the past six months, SPIR shares have lost 22.6%.
