As we have previously noted (most recently, here), geopolitical issues represent an increasingly important source of D&O risk. A lawsuit filed late last week against the fuel cell and power generation firm Bloom Energy highlights this developing source of risk. In the new complaint, a plaintiff shareholder alleges that the company understated its supply chain exposure to China and understated the extent of its reliance on China for a specific rare earth element, scandium. The company’s share price declined after a short seller’s media outlet published a report claiming that the company was, in fact, reliant on Chinese scandium. A copy of the new complaint against Bloom Energy can be found here.
Background
Bloom Energy designs, sells, and installs solid oxide fuel cell systems for on-site power generation. Scandium is a metal that is usually classified as a rare earth metal. It is used to stabilize the ceramic electrolytes in the company’s solid oxide fuel cells.
According to the complaint, throughout the class period, the company made a series of statements disclaiming its supply chain’s reliance on China. Among other things, the company is alleged to have said “We are not dependent on China for a supply chain,” the “supply chain does not have a significant exposure to China,” and most particularly, “We are not dependent on China for Scandium.”
On July 8, 2026, Hunterbrook Media, the media outlet of short seller Hunterbrook Capital, published a report claiming, among other things, that the company is “in fact, reliant on Chinese scandium, according to global trade data, Chinese corporate filings, satellite imagery, and Hunterbrook’s messages with Bloom’s suppliers in China.” The report states that Hunterbrook “traced four separate China-linked routes into Bloom’s supply chain” including “scandium oxide shipped directly to its Delaware plant, plus scandium-bearing ceramics and powders flowing through intermediaries in Thailand, Japan, and South Korea.” According to the complaint, Bloom Energy’s share price declined 5.7% on this news.
The Lawsuit
On July 30, 2026, a plaintiff shareholder filed a securities class action lawsuit in the Northern District of California against Bloom Energy and certain of its directors and officers. The complaint purports to be filed on behalf of a class of investors who purchased the company’s securities between February 27, 2025, and July 8, 2026.
The complaint alleges that during the class period, the defendants failed to disclose to investors: “(1) that Bloom Energy obtained scandium through intermediaries who sourced the metal from China; (2) that, as a result, the Company understated the extent to which it relied on scandium from China; and (3) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.”
The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the class.
Discussion
It is nothing new for supply chain-related issues to give rise to securities class action lawsuits. For example, readers will recall that supply chain-related disruptions arising from the pandemic led to a number of supply chain-related securities class action lawsuits; indeed these kinds of lawsuits continued to be filed long after the pandemic itself had officially ended (as discussed, for example, here). Since that time, there have been further supply chain-related suits, as illustrated most recently by the lawsuit filed in May 2026 against the EV company Lucid (as discussed here).
There are important differences between this lawsuit and many (if not most) of the prior lawsuits based on supply chain issues. For starters, this lawsuit is not related to allegations of supply chain disruption. Apparently, the company’s supply chain continued to function and continued to provide the company with its needed scandium.
The key to this lawsuit’s allegations is the company’s claims that its supply chain did not involve Chinese supply, specifically Chinese scandium. The reason the company was disclaiming a Chinese supply chain connection, and the reason the media reports about a supposed Chinese connection were disruptive, has to do with the ongoing global trade wars between China and the U.S.
The United States and China are engaged in an evolving trade conflict driven by U.S. tariff measures and Chinese retaliatory export restrictions on critical minerals, particularly rare earth metals. Under the current Trump administration, the United States imposed and expanded tariffs on a broad range of Chinese imports with the stated goals of addressing trade imbalances, protecting domestic industries, and reducing reliance on Chinese supply chains. In response, China has increasingly used its dominant position in the rare earth supply chain by tightening export controls on rare earth elements and related processing technologies, materials that are essential for advanced manufacturing, electronics, electric vehicles, renewable energy equipment, and defense systems.
Given these circumstances, this company found it important to emphasize that it had no Chinese supply chain dependence, apparently as a way to reassure investors that it was not vulnerable or susceptible to supply chain disruption. That also explains why the company’s share price declined as news reports circulated that the company supposedly did, in fact, have Chinese connections in its supply chain.
The circumstances involved in this lawsuit illustrate how larger geopolitical issues and global trade concerns can impact companies’ operations and financial results. The case also shows how geopolitical issues can translate into securities class action lawsuits. There have in fact been a number of securities suits filed this year arising out of geopolitical issues, including for example lawsuits relating to companies’ statements about the impact of the Trump administration’s tariffs (as for example with respect to the June 2026 tariff-related lawsuit filed against First Solar, as discussed here).
There is a sense in which the lawsuit is also a tariff-related suit, since at its base the case involves trade conditions that have arisen out of the Trump administration’s tariff policies. However, this case is slightly different than the prior tariff-related suits; this suit is more about the geopolitical and trade circumstances that have arisen in the wake of Chinese retaliatory measures and global trade war that has arising in the wake of the Trump administration’s tariff policies.
All of these cases illustrate the point that geopolitical issues in the current environment are an increasingly important element of D&O risk. Nor are the geopolitical issues related solely to tariff-related issues.
Indeed, a July 31, 2026, Wall Street Journal article (here) illustrates how the conflict in Iran, and the ensuing closure of the Straits of Hormuz, is putting pressure on companies in a wide variety of industries, including industries as diverse as paint, beer, consumer products, as well as aluminum, fertilizer, and, of course, energy. These pressures may affect the operations and financial results of many companies. And, as these companies experience disappointing results, the geopolitical factors causing the problems may well translate into securities class action lawsuits as well.
In other words, it seems likely that in the months ahead, geopolitical factors will remain an increasingly important part of D&O risk.
About Scandium: I have to confess that prior to reading this complaint, I had not thought much about Scandium. In case you are as curious about scandium as I was, here is an excerpt from the search I launched in Copilot about the element:
Scandium (chemical symbol Sc, atomic number 21) is a soft, lightweight, silvery-white metal. It is classified as a transition metal, although it is often grouped with rare earth elements because of its similar geochemical behavior and occurrence in some rare-earth-bearing deposits.
Despite its name association with rare earths, scandium is not especially scarce in the Earth’s crust. The challenge is that it is rarely found in concentrations high enough to mine economically, so virtually all scandium production comes as a byproduct of mining other metals.
Scandium apparently has a few high-value uses, one of which is in “Solid oxide fuel cells, where scandium-stabilized zirconia can improve performance.”
About the Chinese connection, Copilot said: “China is widely regarded as one of the leading producers and processors of scandium and is a major player in global supply. Reports indicate that China has multiple scandium-producing operations and occupies a dominant position in processing critical rare-earth-related materials.”
Interestingly, Copilot also noted the following: “The United States has known scandium resources and has previously produced scandium. Potential sources exist in multiple states and are often associated with other mining operations. However, according to the U.S. International Trade Commission, the U.S. currently has had little or no significant operating primary scandium production capacity in recent years, leaving the country dependent on imports and foreign processing.”
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