Sequans Hit with Securities Lawsuit Over ‘Misstated’ Business Process

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Sequans Communications S.A. and two chief officers are defendants in a proposed class action lawsuit alleging they violated federal securities law by misleading the investing public about their business process. In particular, the suit claims they failed to disclose that they were improperly recognizing revenue, despite statements assuring stockholders of their compliance with financial processes.

The suit alleges the defendants informed the public on several occasions between April 2016 and March 2017 that they were following the below process with regard to recognizing revenue (emphasis added):

“Revenue from the sale of products is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and when no continuing managerial involvement to the degree usually associated with ownership nor effective control over the sale of products is retained, which usually occurs on shipment of the goods. Products are not sold with a right of return but are covered by warranty.”

On August 1, 2017, however, the company reportedly issued a press release announcing its second quarter 2017 financial results, in which it noted that it was forced to reduce revenue by $740,000 due to a product return. One of the individual defendants further explained that a customer was unable to sell the product and could not pay for it, the suit says. On this news, the price of Sequans stock allegedly fell 18.21 percent, representing a significant loss to investors.