Key Takeaways:
Investors in Cogent Communications face a Sept. 21 deadline to lead a securities fraud class action after the stock fell 29 percent.
"The complaint alleges Cogent overstated demand for its wavelength business, repeatedly touting a large backlog of customer orders while reassuring investors it could meet financial targets and maintain its dividend," Bleichmar Fonti & Auld LLP said.
The suit, filed in the U.S. District Court for the District of Columbia, covers shares bought between Feb. 29, 2024, and May 1, 2026. Cogent's stock fell 10 percent on Feb. 27, 2025, after fourth-quarter results showed wavelength revenue of $7 million and a backlog that had shrunk to 2,700 from 3,400. It dropped another 7 percent on May 8, 2025, when executives said they expected to convert only 5 percent of the backlog each month. A combined 32 percent decline followed in August after the company added just 147 net wavelength connections in the second quarter.
The steepest slide came in November, when Cogent cut its quarterly dividend 98 percent to 2 cents a share, ending 52 straight quarters of increases. The stock fell 56 percent to $16.68 by Nov. 13. The May 4 drop to $16.37 followed first-quarter results showing wavelength revenue of $13.6 million and just 199 net connection additions, with Chief Executive David Schaeffer conceding customers were pushing out acceptance of wavelengths.
The case, City of Southfield Fire and Police Retirement System v. Cogent Communications Holdings, No. 26-cv-02609, alleges the company misrepresented customer demand and the nature of its wavelength backlog. It also claims Schaeffer faced an undisclosed risk of being forced to sell large amounts of stock because of high-risk pledging activities. Robbins Geller Rudman & Dowd and Kahn Swick & Foti are among firms soliciting investors to join the action.
Cogent, a facilities-based provider of internet access, private network services, optical wavelength and transport services, and data center colocation, has not yet responded to the allegations.
Investors who bought shares during the class period have until Sept. 21 to seek appointment as lead plaintiff. Participation is not required to share in any recovery, and representation is on a contingency basis.
The litigation adds to pressure on a stock that has lost more than half its value since the dividend cut, testing confidence in Cogent's turnaround. The lead plaintiff deadline on Sept. 21 will determine who steers the case, with the company's next quarterly report due in August offering the first test of whether wavelength demand is recovering.
This article is for informational purposes only and does not constitute investment advice.
