Silvaco faces punitive damages in fraud case

Silvaco Group, Inc., a prepackaged software services company, has been ordered to pay significant punitive damages following a recent jury verdict. On Thursday, the jury in the ongoing Nangate Litigation awarded $17.0 million in punitive damages against the company related to fraud claims.

Additionally, punitive damages of $6.0 million against chairperson Ms. Kathy Pesic, and $10.0 million against former board member Mr. Iliya Pesic, were also awarded.

The litigation stems from the 2018 acquisition of Nangate Denmark ApS by Silvaco, with the selling shareholders of Nangate and a third cross-complainant, referred to as the Nangate Parties, alleging breach of contract and fraud.

On July 23, the jury had initially awarded the Nangate Parties either $11.3 million for breach of contract claims or $6.6 million for fraud claims against the company and the Pesics, plus the punitive damages.

The company, Ms. Pesic, and Mr. Pesic plan to challenge the verdicts and anticipate that any appeals could extend over two years or more. The company has expressed confidence in strong arguments that could potentially reduce the punitive damages, considering them excessive under California law.

The financial implications for Silvaco remain uncertain, as litigation outcomes can vary widely. The company may be required to post an appeal bond, typically 1.5 times the judgment amount, to prevent the plaintiffs from collecting while an appeal is pending.

The company's latest Quarterly Report and SEC filings provide further details on the risks and uncertainties related to this case.

Silvaco Group, Inc. has been ordered to pay $11.3 million in a legal dispute to Nangate, a company it acquired in 2018. Additional punitive damages related to claims of fraud are also being considered. Despite this, Silvaco maintains a strong financial position, with an unaudited cash, cash equivalents, and marketable securities position of $102.3 million reported as of June 30, 2024.

Several investment firms have maintained a positive outlook on the semiconductor software provider. Craig-Hallum initiated coverage with a Buy rating, emphasizing Silvaco's strong position in the Technology Compute-Aided Design (TCAD) sector.

Needham joined in, giving Silvaco a Buy rating and predicting a double-digit growth trajectory and improved operating margin. Rosenblatt Securities also echoed these sentiments, setting a 12-month price target of $26.00.

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