TerraForm Global misled shareholders into investing $620 million into the renewable-energy company, and its stock dropped by over 50 percent within three months, shareholders say in a class action filed in state court.
Lead plaintiff Simon Fraser's securities class action, filed Friday in San Mateo County Superior Court, asserts violations of the Securities Act against TerraForm Global and its parent company SunEdison Inc.
The complaint is the Top Download for Courthouse News on Tuesday.
TerraForm, which owns and operates renewable-energy generation assets worldwide, was created by solar company SunEdison to serve as an investment vehicle to fund SunEdison projects.
Called "yieldcos," such investment vehicles created by parent companies "have become popular among investors seeking dividends, and TerraForm Global was marketed to such dividend-seeking investors as a 'high-growth' company," the shareholders say in their 20-page complaint.
On Aug. 4, the company completed its initial public offering of 45 million shares at $15 per share, leaving TerraForm with net proceeds of approximately $620 million from the IPO.
SunEdison issued a press release two days later disclosing second quarter losses of nearly 40 cents more per share than estimated, which caused TerraForm's stock to decline by $2.39, the lawsuit says.
A month later, SunEdison insiders revealed during an Oct. 7 investor conference call that the company was shifting its focus away from yieldcos such as TerraForm and indicated a slowdown in the acquisition of energy-generating assets, including solar and wind assets, the shareholders say.
SunEdison also said it was reducing its workforce by up to 15 percent, according to the lawsuit.
On Thursday, TerraForm's shares dropped to $7.94 for a cumulative loss of more than $7 per share in less than three months.
The shareholders say that the information TerraForm filed with the Securities and Exchange Commission in anticipation of its IPO was misleading because it did not disclose that SunEdison was about to report disappointing financial results for the 2015 second quarter.
SunEdison failed to disclose that it was changing its business strategy in a way that would hurt TerraForm, the shareholders say.
The class seeks to represent anyone who purchased the common stock of TerraForm Global pursuant to the company's alleged false statements issued in connection with its IPO, and asks for compensatory damages.
Besides TerraForm and SunEdison, the class action also names TerraForm's CEO, chief financial officer and senior vice president; JPMorgan Securities; Barclays Capital; Citigroup Global Markets; Goldman Sachs; Merrill Lynch, Pierce Fenner & Smith; Deutsche Bank Securities; BTG Pactual US Capital; Itau BBA USA Securities; SMBC Nikko Securities America; SG Americas Securities; and Kotak Mahindra. The financial institutions participated as underwriters for the IPO, the class says.
They are represented by Lesley Portnoy with Glancy Prongay & Murray. Portnoy did not immediately respond to a request for Both TerraForm and SunEdison declined to comment.