| COMPANY |
Mercury Systems, Inc. |
| COURT |
United States District Court for the District of Massachusetts |
| CASE NUMBER |
23-cv-13065 |
| JUDGE |
The Hon. William G. Young |
| CLASS PERIOD |
December 7, 2020 through June 23, 2023 |
| SECURITY TYPE |
Common Stock |
Mercury investors may receive additional information about the case by clicking the link "Submit Your Information" above. If you are a member of the class described below, you may no later than February 12, 2024 move the Court to serve as lead plaintiff of the class, if you so choose.
A class action lawsuit has been filed on behalf of those who purchased or acquired Mercury Systems, Inc. (“Mercury”) (NASDAQ: MRCY) common stock between December 7, 2020 and June 23, 2023, both dates inclusive (the “Class Period”).
Case Background:
Mercury is a technology company that produces component modules and subsystems for the aerospace and defense industries. The Class Period begins on December 7, 2020, when Mercury announced that it had signed a definitive agreement to acquire Physical Optics Corporation (“POC”), in an all-cash transaction. Prior to and during the Class Period, Mercury acquired numerous other companies and used multiple improper revenue recognition practices to mask its inability to grow organically.
The truth began to emerge on July 26, 2022, when market analyst Glasshouse Research published a report detailing how its “analysis on [Mercury] will reveal how management has used accounting gimmicks to obfuscate true economic earnings while concealing the decay of its core company.” Specifically, the report stated that Mercury’s management has “prematurely recognized revenue on significant projects boosting both revenue and earnings unsustainably” while also using recent acquisitions to conceal true earnings “with material non-GAAP exclusions,” and that the company’s free-cash-flow is “grossly overstated as Mercury [] has been stifling its vendors to conserve cash.” On this news, the price of Mercury shares declined by $4.87 per share, or approximately 7.8%, from $62.13 per share to close at $57.26 on July 26, 2022.
Over the next several quarters, however, Mercury continued to conceal the full truth by continuing to hide troubled projects and providing an untrue picture of its financial condition.
The truth finally began to be revealed, however, on May 2, 2023, after the market closed, Mercury announced weak third quarter 2023 earnings and lower margins, causing the company to cut its full year 2023 guidance. For the first time, Mercury revealed that approximately a dozen of its 300-plus active programs had been negatively affected by higher costs related to both labor and supply chain inefficiencies, manufacturing constraints, and inflation. Despite this admission, Mercury insiders continued to downplay these issues. On this news, the price of Mercury shares declined by $7.84 per share, or approximately 17.3%, from $45.28 per share to close at $37.44 on May 3, 2023.
Then, on June 23, 2023, Mercury announced that its CEO had abruptly resigned and that the company’s recent strategic review of acquisition alternatives had been unsuccessful. On this news, the price of Mercury shares declined by $3.37 per share, or approximately 9.6%, from $34.87 per share to close at $31.50 on June 26, 2023.
The complaint alleges that, throughout the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose that: (1) Mercury’s serial acquiror strategy was not working and the company was using improper revenue recognition practices such as changing to long-term contracts to mask deteriorating organic growth; (2) the acquisition of POC caused POC to lose its small business accreditation, which prevented POC from winning contracts that made up a large portion of its historical business; (3) Mercury had at least twenty programs that were suffering and not performing well; and (4) as a result, Defendants’ positive statements about the company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis at all relevant times.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Filling out the online form above or communicating with any counsel is not necessary to participate or share in any recovery achieved in this case. Any member of the purported class may move the court to serve as a lead plaintiff through counsel of his/her choice, or may choose to do nothing and remain an inactive class member.
If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP: Jonathan Naji, Esq. (484) 270-1453 or via e-mail at info@ktmc.com. If you would like additional information about the suit, please click on the link "Submit Your Information" above and fill out the form as promptly as possible.