Generac Holdings Inc. (GNRC) Misled Investors Regarding the Quality of its Products and its Business Prospects

A shareholder filed a class action on behalf of all persons and entities who purchased or otherwise acquired Generac Holdings Inc. (NYSE: GNRC) common stock between April 29, 2021 and November 1, 2022. The complaint seeks damages under the Securities Exchange Act of 1934.  Generac designs, manufactures, and sells power generation equipment, energy storage systems, and other power products for the residential and light commercial and industrial markets worldwide.

According to the complaint, defendants concealed from investors that Generac's component part – "SnapRS" – was defective. Consumers and business partners informed the Company of the defect, but defendants continued to tout the success and reliability of its solar energy products.

On August 1, 2022, a Generac channel partner – Pink Energy – filed a lawsuit against Generac, revealing that the Company’s “defective” SnapRS components caused millions of dollars of damage, giving rise to liability that threatened Pink Energy’s solvency.  The disclosures in the Pink Energy complaint caused the price of Generac shares to decline by $3.31 per share.  The liability created by defective SnapRS components ultimately forced Pink Energy to declare bankruptcy on October 7, 2022.

On October 19, 2022, Generac revealed that it had taken “pre-tax charges totaling approximately $55 million, including approximately $37 million of clean energy product warranty-related matter and approximately $18 million of bad debt expense related to a clean energy product customer that has filed for bankruptcy.” On this news, the price of Generac shares declined by $37.44 per share, or 25%. 

Finally, on November 2, 2022, Generac released its earnings results for the third quarter of 2022, and lowered sales guidance on its solar energy business for the remainder of the year by approximately 40%.  The lowered guidance was attributed to “the loss of a major customer during the quarter, along with the specific warranty-related issue”—i.e., the defective SnapRS component and the Pink Energy bankruptcy that resulted directly from that defect.  Analysts expressed shock upon learning how dependent Generac’s clean energy business was on Pink Energy, with several analysts noting that investors had not been told of the significant concentration of that business with a single partner.  As a result of these disclosures, the price of Generac shares declined by $8.99 per share, or 8%.

What Now: Shareholders who purchased shares of Generac Holdings Inc. between April 29, 2021 and November 1, 2022, must file their papers to be appointed lead plaintiff for the class by January 30, 2023. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.  You do not have to participate in the case to be eligible for a recovery.