Allegations
According to the complaint, defendants provided investors with material information concerning the elevated demand from Chinese original equipment manufacturers (OEMs) and in the general Chinese domestic market for Ultra Clean’s products throughout the fiscal year 2024. Defendants’ statements included, among other things, reports of increased demand for the Company’s products and services in the domestic Chinese market and reports of increased revenue, including revenue doubling with no signs of slowing down, due to the elevated demand in China for Ultra Clean’s products and services.
Defendants provided these overwhelmingly positive statements to investors while, at the same time, disseminating materially false and misleading statements and/or concealing material adverse facts concerning the true state of the demand for Ultra Clean’s products and services in the domestic Chinese market; notably, that the Company was facing a customer ramp issue with one of its critical customers, as well as a combination of inventory and demand corrections, which, ultimately, caused weakness for Ultra Clean in China.
On February 24, 2025, Ultra Clean published fourth quarter and full year 2024 fiscal results and hosted an associated earnings call, where the Company’s executives revealed that Ultra Clean was facing “demand softness” in China. In particular, Ultra Clean was facing decreased demand in China due to extended qualification timelines and inventory absorption.
Investors and analysts reacted immediately to these revelations. The price of Ultra Clean’s common stock declined dramatically. From a closing market price of $36.06 per share on February 24, 2025, Ultra Clean’s stock price fell to $25.90 per share on February 25, 2025, a decline of over 28% in the span a single day.