Lumen Misled on Fiber Network Expansion, Says Investor's Class Action
Lumen executives misrepresented to investors and the public the company’s rate of investment and progress in expanding fiber services to small and medium-sized businesses (SMBs) and residential markets, alleged a March 3 class action (docket 3:23-cv-00286) filed in U.S. District Court for Western Louisiana in Monroe.
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Plaintiff Diane Voigt seeks remedies under the Securities Exchange Act for class members who bought CenturyLink or Lumen common stock between Sept. 14, 2020, and Feb. 7 this year. At the beginning of the class period, the company changed its name from CenturyLink to Lumen as part of a strategy to cut off market segments and operations that didn’t align with its objectives and add new segments aligned with its new vision, said the complaint.
Executives throughout the class period represented to investors that the company was “not capital-constrained” as it expanded its Quantum Fiber footprint, the complaint said. Despite those statements, Lumen was experiencing “serious headwinds” that were blocking its growth in newly targeted fiber markets, it said.
In February 2022, executives began to admit expansion into SMB and residential fiber services markets was moving “slower than previously represented,” said the complaint. The stock price fell from $12.82 per share Feb. 9, 2022, to $10.83 at the next day's close, Voigt said. It fell 18% from Nov. 2 to $5.80 on Nov. 3 when CEO Jeff Storey disclosed the company was “not yet at the pace of build we expect or want” with the Quantum Fiber brand. Lumen had “abruptly announced” Sept. 13 that Storey would step down as CEO but remain with the company through Dec. 31 to assist with the transition, the complaint said.
Last month, executives said they had “pressed ‘more of a stop button than a pause button’” on the company’s investment in the Quantum Fiber network and expansion into the SMB and residential markets as they reevaluated strategic priorities, the complaint said. The stock closed at $3.95 on Feb. 8, down $1.04 from the previous day “upon the news that Lumen’s progress was slower than represented” and that it had stopped investing in the Quantum Fiber network expansion. “The price of Lumen’s common stock plummeted as the artificial inflation was removed from the price,” it said.
The defendants -- Lumen and six current and former executives -- “acted with scienter,” knowing public documents and statements issued “were materially false and misleading,” the complaint said. They “knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements and documents” in violation of federal securities laws, it said.
The plaintiff seeks damages, including interest, reasonable legal costs and attorneys’ fees and equitable/injunctive relief. Lumen doesn't comment on pending litigation, a spokesperson emailed Wednesday.