| COMPANY |
The Chemours Company |
| COURT |
United States District Court for the District of Delaware |
| CASE NUMBER |
1:24-cv-00361-RGA |
| JUDGE |
The Hon. Richard G. Andrews |
| CLASS PERIOD |
February 10, 2023 through February 28, 2024 |
| SECURITY TYPE |
Common Stock |
LEAD PLAINTIFF DEADLINE IS MAY 20, 2024.
A class action lawsuit has been filed on behalf of those who purchased or acquired The Chemours Company (“Chemours” or the “Company”) (NYSE: CC) common stock between February 10, 2023 and February 28, 2024, both dates inclusive (the “Class Period”).
Case Background:
Headquartered in Wilmington, Delaware, Chemours is an industrial and specialty chemical company for a number of markets including, among others, the “coatings, plastics, refrigeration and air conditioning, transportation, semiconductor and consumer electronics, general industrial, and oil and gas” markets.
After the market closed on February 9, 2023, Chemours announced its fourth quarter and full year 2022 financial results. As is relevant here, Chemours announced Free Cash Flow (defined as cash flows from operations, less purchases of property, plant, and equipment) of $94 million in the fourth quarter of 2022 and $447 million in full year 2022, “demonstrating [Chemours’s] continuing ability to generate strong Free Cash Flow.”
The following day, February 10, 2023 (the first day of the Class Period), Chemours filed its 2022 annual report on Form 10-K (the “2022 Annual Report”) with the SEC and reiterated that it generated Free Cash Flow of $447 million in full year 2022. In connection with the 2022 Annual Report, the Company’s CEO Mark Newman and then CFO Sameer Ralhan certified the accuracy of the Company’s financial reports and the adequacy of the Company’s internal control over financial reporting.
Chemours reported quarterly and year-to-date Free Cash Flow metrics in connection with each of the Company’s quarterly financial results throughout the remainder of the Class Period. Each of the Company’s quarterly financial reports filed on Form 10-Q during the remainder of the Class Period contained substantially identical certifications to those set forth in the 2022 Annual Report from Chemours’s CEO Newman and CFO Ralhan (first quarter of 2023) and CFO Jonathan Lock (second and third quarters of 2023).
Prior to and during the Class Period, Chemours also set and publicized certain criteria for executive compensation. For example, pursuant to Chemours’s Annual Incentive Plans (“AIPs”) for 2022 and 2023, the Company’s senior executive officers (including the CEO and CFO) were entitled to additional cash compensation if certain targets, including Free Cash Flow targets, were met. Similarly, pursuant to Chemours’s Long-Term Incentive Plans (“LTIPs”), the Company’s senior executive officers (including the CEO and CFO) were entitled to stock compensation if certain targets, including Free Cash Flow Conversion (defined as cash flows from operations, less purchases of property, plant, and equipment divided by Adjusted EBITDA) targets, were met.
Notwithstanding Defendants’ repeated assurances regarding the accuracy of the Company’s financial reports and the adequacy of the Company’s internal control over financial reporting, investors began to learn the truth on February 13, 2024, when Chemours “announced that it has postponed the release of its financial results and conference call related to the fourth quarter and full year ended December 31, 2023, which had previously been scheduled for February 14, 2024 and February 15, 2024, respectively,” and that it now “expect[ed] to issue its fourth quarter and full year 2023 financial results after market close on Wednesday, February 28, 2024.” According to the Company, the delay was necessary “because it needs additional time to complete its year-end reporting process” and “is evaluating its internal control over financial reporting . . . with respect to maintaining effective controls related to information and communications.” Chemours also revealed that it needed additional time for its Audit Committee to conduct a related internal review.
In response to this initial development, the price of Chemours common stock fell $3.85 per share, or more than 12%, from a close of $30.49 per share on February 13, 2024, to close at $26.64 per share on February 14, 2024.
Then, before the market opened on February 29, 2024, Chemours stunned investors when it announced that it was delaying the filing of its annual report for 2023 and that its Board of Directors had “place[d] President and Chief Executive Officer Mark Newman, Senior Vice President and Chief Financial Officer Jonathan Lock and Vice President, Controller and Principal Accounting Officer Camela Wisel on administrative leave . . . pending the completion of an internal review being overseen by the Audit Committee of the Board of Directors with the assistance of independent outside counsel.” According to the Company, the scope of the investigation “includes the processes for reviewing reports made to the Chemours Ethics Hotline” and Chemours’s “practices for managing working capital, including the related impact on metrics within the Company’s incentive plans [and] certain non-GAAP metrics” in the Company’s financial reports. Given the importance of these issues—not only to executive compensation, but also investors’ assessment of Chemours’s financial performance—the Company acknowledged that it “is evaluating one or more potential material weaknesses in its internal control over financial reporting as of December 31, 2023 with respect to maintaining effective controls related to the control environment, including the effectiveness of the ‘tone at the top’ set by certain members of senior management.”
In response to these revelations, the price of Chemours common stock plummeted $9.05 per share, or more than 31%, from a close of $28.72 per share on February 28, 2024, to close at $19.67 per share on February 29, 2024.
The Complaint alleges that, throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business and operations. Specifically, Defendants misrepresented and/or failed to disclose that: (1) certain of the Company’s senior executive officers manipulated Free Cash Flow targets as a means to maximize additional cash and stock incentive compensation applicable to executive officers pursuant to the Company’s AIPs and LTIPs; (2) the Company’s accounting practices and procedures, including its internal control over financial reporting, were deficient; and (3) as a result, Defendants’ statements about the Company’s business, operations, and prospects lacked a reasonable basis.
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.