Bragar Eagel & Squire, P.C., a nationally stockholder rights law firm, announces that a class action lawsuit has been filed against Seagate Technology Holdings Plc in the United States District Court for the Northern District of California on behalf of all persons and entities who purchased or otherwise acquired Seagate securities between September 15, 2020 and October 25, 2022, both dates inclusive. Investors have until September 8, 2023 to apply to the court to be appointed as lead plaintiff in the lawsuit.
Seagate is a supplier of storage products, including HDDs. By the start of the class period, Huawei Technologies Co. Ltd., a Chinese multinational technology, had emerged as a significant global purchaser of storage products, including HDDs, produced by Seagate and other U.S.-based suppliers.
On May 16, 2019, Huawei and certain of its non-U.S. affiliates were added to the U.S. Department of Commerce Bureau of Industry and Security’s (BIS) Export Administration Regulations (EAR) Entity List. The EAR Entity List is a list of names of certain foreign persons and entities that are subject to specific license requirements for the export, re-export, and/or transfer (in-country) of specified items. The Entity List designation was based on a determination made by multiple U.S. government agencies “that there is reasonable cause to believe that Huawei has been involved in activities contrary to the national security or foreign policy interests of the United States.”
Then, on August 17, 2020, the BIS imposed export controls over certain foreign-produced items “to better address the continuing threat to U.S. national security and U.S. foreign policy interests posed by Huawei and its non-U.S. affiliates.”
On October 26, 2022, Seagate disclosed that it received a Proposed Charging Letter from the BIS alleging that Seagate violated the EAR by providing Seagate HDDs to “a customer and its affiliates listed on the BIS Entity List between August 2020 and September 2021.”
On this news, the price of Seagate common stock fell nearly 8%, damaging investors. Over the following three trading days, Seagate’s stock price continued to drift lower, falling an additional nearly 7%.
As the Seagate class action lawsuit alleges, defendants throughout the class period made false and/or misleading statements and/or failed to disclose:
- (i) the nature and magnitude of Seagate’s HDD sales to Huawei, including that Seagate experienced a significant acceleration in sales to Huawei immediately after the BIS rules went into effect and Seagate’s competitors stopped selling to Huawei; and
- (ii) that the underlying details of Seagate’s HDD manufacturing process, including the use of covered U.S. software and technology in “essential ‘production‘” processes, rendered its sales to Huawei in violation of the BIS export rules As a result, Seagate was in blatant violation of the BIS export rules which resulted in an ongoing investigation by the U.S. Department of Commerce and exposed Seagate to hundreds of millions of dollars in fines and penalties.