SunPower, a domestic solar company in the United States, finds itself entangled in class action lawsuits as investors allege the company's failure to disclose inaccuracies in its reporting of cost of revenue and inventory metrics. This legal action comes in the wake of SunPower's admission of internal control problems, raising concerns over its financial reporting practices.
On October 24th, SunPower disclosed an internal control issue, stating that during the preparation of its financial statements, it had identified a potential overstatement of the value of consignment inventory for microinverter components at certain third-party locations, with an estimated range of approximately $16 to $20 million. This revelation led to the acknowledgment of a material weakness in the company's internal control over financial reporting.
SunPower is also in negotiations to address the repercussions of the impending restatement of its financials under the company's credit agreement with Bank of America. According to a statement released by the law firm Bragar Eagel & Squire, SunPower is set to restate certain previously issued financial statements for fiscal year 2022 and the first two quarters of 2023.
The company's financial performance has taken a hit, with a net loss of $30 million and total losses before inflation, taxes, depreciation, and amortization amounting to $3 million in the second quarter of 2023. In its most recent announcement of preliminary Q3 financial results, SunPower reported an increased net loss of $32 million and revised its 2023 guidance, projecting a net loss in the range of $165 million to $175 million.
SunPower's CEO, Peter Faricy, attributed the revised guidance to factors such as lower-than-expected consumer demand and delayed revenue recognition due to extended cycle times. Despite industry-wide challenges, Faricy expressed optimism, citing positive indicators in September and early October, including record-high sales of storage solutions, robust growth in SunPower Financial, and signs of improved consumer demand.