LI Stock Alert: Li Auto faces new class action lawsuit

Shares of Li Car (NASDAQ:LI) have fallen more than 40% so far this year as Chinese electric vehicle (EV) stocks continue to face competitive pressures and macroeconomic headwinds. Now, a class action lawsuit has been filed for shareholders who purchased LI shares between February 26 and May 20.

The lawsuit alleges that Li and certain of his executives violated the Securities Exchange Act of 1934 by making misleading statements and withholding material information.

In the company’s fourth-quarter earnings report, CEO Xiang Li noted that Li Auto “continuously improved operating efficiency throughout the year.” Chief Financial Officer Tie Li said the company will have “healthy profitability and capital strength” in 2024.

However, the complaint points out that Li has exaggerated its demand and the effectiveness of its MEGA EV launch strategy, as well as the fact that the company is unlikely to meet its first-quarter delivery target. Li delivered 80,400 vehicles in the quarter, up 52.9% year over year.

LI share: Li Auto faces new class action lawsuit

On March 21, Li reduced its first-quarter delivery forecast to 76,000-78,000 vehicles from 100,000-103,000. The company also admitted that its MEGA operating strategy was “mistimed.”

“We planned the operation of Li MEGA as if the model had already entered the 1-to-10 scaling phase, while in reality we were still in the beginning 0-to-1 business validation phase,” said Chairman and CEO Xiang Li. “Similar to Li ONE and our EREV technologies, Li MEGA and our BEV technologies must also go through this 0-to-1 validation process.”

LI shares fell about 7.5% following the news.

On May 20, the day of Li Auto’s earnings announcement, the company announced that first-quarter profits fell 46% compared to the previous quarter, the lawsuit says. That caused LI stock to fall 12.8%. Since May 20, LI has lost another 7.5%.

For the second quarter, Li expects deliveries of 105,000 to 110,000 vehicles, resulting in total revenue of between $4.1 billion and $4.3 billion. Deliveries are expected to grow 21.3 percent to 27.1 percent annually, while revenue is expected to grow 4.2 percent to 9.4 percent.

Shareholders who wish to serve as lead plaintiff in the proceedings must notify the court by July 9.

At the time of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing guidelines.