A new complaint was filed against ASML Holdings N.V. (ASML) by shareholder (plaintiff) City of Hollywood Firefighters’ Pension Fund on November 14, 2024, in the U.S. District Court for the Southern District of New York. The defendants in the complaint are the company, President and CEO Christophe Fouquet, EVP and CFO Roger Dassen, and ex-CEO Peter Wennink.
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The plaintiff alleges that they purchased ASML stock at artificially inflated prices between January 24, 2024 and October 15, 2024 (the “Class Period”). The plaintiff is now seeking compensation for the financial losses incurred during this period. To learn more about the lawsuit, click here.
Netherlands-based ASML is a global manufacturer of lithography machines that are used in the semiconductor chip-making process. ASML is one of the prominent players in the current AI (artificial intelligence) age. ASML is a supplier to some of the big microchip manufacturing companies that use its machines in chip manufacturing plants.
The filed complaint alleges that during the Class Period, the defendants misled ASML investors in violation of Sections 10(b) and 20(a) of the Securities Exchange Act.
Plaintiff’s Allegations
According to the complaint, ASML Holdings intentionally misrepresented information presented in its financial statements submitted to the U.S. SEC (Securities and Exchange Commission). The plaintiff alleges that the defendants failed to exercise proper oversight and control over the preparation and submission of public financial statements.
In particular, the defendants are accused of misrepresenting the revenue and gross margin expectations for Fiscal 2025 despite knowing the odds. Since 2022, ASML and the defendants have been confidently reiterating the FY25 revenue guidance of between 30 to 40 billion Euros and gross margin targets of 54% to 56%. The robust guidance was backed by the company’s anticipated sale of equipment to China, one of its largest markets.
Unfortunately, in 2023, the Dutch Government announced stringent export control norms for certain semiconductor technology. These put a limit on the number of ASML machines that could be exported to China. To make things worse, in January 2024, the Dutch government further tightened the norms and completely stopped all of ASML’s business in China.
Additionally, the global semiconductor industry went into a slowdown in the post-COVID period, coupled with high inflation and political unrest. Even then, during its Q4 and full-year Fiscal 2023 results, ASML reported a 30% year-over-year jump in sales and solid order intake for the fourth quarter. Once again, the defendants reassured investors that they were most likely to meet their earlier guidance for Fiscal 2025, without acknowledging the fact that the macro-tides were against them.
ASML Allegedly Misrepresented Key Information
In contrast to the claims made by ASML and the defendants, the company had purportedly retained the revenue and gross margins outlook for Fiscal 2025 being fully aware that it was impossible to meet them.
The truth became clear on October 15, 2024, when ASML released its Q3 FY24 results. ASML mentioned that the quarterly bookings had declined by a drastic 53%. Moreover, the company slashed its FY25 sales guidance to be between 30 and 35 billion Euros, and its gross margin forecast in the range of 51% to 53%. The management attributed the lowered guidance to the slower-than-expected recovery in the global semiconductor market.
Following the news, disgruntled investors dumped ASML stock, dragging down its share price by 16.3% on October 15.
To conclude, the defendants allegedly misled investors about the revenue and gross margin expectations for Fiscal 2025, despite being fully aware of the challenges in meeting the targets. In the past six months, ASML stock has plummeted 32%, causing massive damage to shareholder returns.
