Dow Inc.’s Securities Class Action Lawsuits and Their Implications for Shareholders

The securities class action lawsuit Sarti v. Dow Inc. (No. 25-cv-12744, E.D. Mich.) has thrust the industrial giant into a legal and financial crossfire, raising critical questions for shareholders. Filing dates, allegations, and financial disclosures paint a grim picture of a company struggling to navigate macroeconomic headwinds while facing investor skepticism. As the lead plaintiff deadline looms on October 28, 2025, investors must weigh the compounding risks of litigation, earnings underperformance, and a dividend cut that signals a “lower-for-longer” earnings outlook.

Legal Allegations and Investor Sentiment

The lawsuit accuses Dow Inc., The Dow Chemical Company, and senior executives of misleading investors between January 30, 2025, and July 23, 2025, by downplaying competitive pricing pressures, declining global demand, and oversupply challenges [1]. According to the complaint, these misstatements artificially inflated the stock price until key events exposed the company’s vulnerabilities: a BMO Capital downgrade on June 23, 2025, and a July 24, 2025, earnings report revealing a $801 million GAAP net loss and a 50% dividend cut [1][4]. The stock price plummeted 17.45% following these disclosures, eroding investor confidence [6].

This legal scrutiny mirrors broader trends in the chemicals sector, where securities fraud cases often stem from misaligned corporate messaging and operational realities. For example, The Chemours Company faced a similar lawsuit in 2023–2024 over manipulated Free Cash Flow metrics [4], while Bayer AG settled a $38 million securities case tied to its Monsanto acquisition [5]. These precedents highlight the sector’s susceptibility to litigation when executives fail to align public statements with financial performance.

Financial Underperformance and Strategic Reforms

Dow’s Q2 2025 results underscore the gravity of its challenges. Net sales fell 7% year-over-year to $10.1 billion, driven by a 7% decline in local prices and weak demand across operating segments [1]. The company’s GAAP net loss of $801 million—a stark contrast to a $819 million profit in the prior-year period—forced a dividend cut to 35 cents per share, a move described as “right-sizing” to preserve cash [6]. This decision, while prudent in the short term, signals a prolonged industry downturn and raises concerns about Dow’s ability to sustain shareholder returns.

Comparisons to peers further highlight Dow’s struggles. Its revenue decline of -7.43% outpaced the -1.12% average for competitors, and its market share dropped to 5.68% during the quarter [2]. Meanwhile, the company’s debt-to-equity ratio of 103.62% and negative operating cash flow of $470 million exacerbate balance sheet risks [6]. To mitigate these pressures, Dow has outlined a $6 billion cost-cutting plan, including asset divestitures and a $2.4 billion infrastructure partnership [4]. However, such measures may not offset the reputational damage from the lawsuit or restore investor trust.

Reputational and Sector-Wide Risks

The lawsuit’s potential financial impact extends beyond settlement costs. Reputational harm could amplify existing challenges, particularly in an industry already grappling with PFAS-related liabilities. For instance, the $875 million PFAS settlement among Chemours, DuPont, and Corteva in 2025 illustrates how environmental and securities litigation can create long-term liabilities [2]. While Dow’s case is distinct, the precedent underscores the sector’s vulnerability to overlapping legal and regulatory scrutiny.

Moreover, the lawsuit could trigger a wave of investor lawsuits if the court rules in favor of plaintiffs. Historical settlements, such as the $47.5 million payout by Olaplex Holdings for undisclosed ingredient risks [3], demonstrate how reputational harm and financial penalties often compound in securities cases. For Dow, the stakes are high: a settlement could drain liquidity at a time when the company is already prioritizing cost discipline.

Investor Strategy and the Lead Plaintiff Deadline

As the October 28, 2025, deadline approaches, investors must act strategically. Those who purchased Dow securities between January 30, 2025, and July 23, 2025, are eligible to seek leadership in the class action [1]. Legal experts emphasize the importance of securing counsel to navigate the complexities of the case, particularly given the high stakes for shareholders [6].

For long-term investors, the lawsuit adds another layer of uncertainty to an already volatile sector. While Dow’s EV/Sales multiple of 0.75× suggests undervaluation [5], the company’s dividend yield of 5.5% post-cut remains a double-edged sword. Analysts caution that the stock’s “Buy” rating (held by only 13% of analysts) reflects skepticism about its ability to sustain profitability [5]. Investors must weigh these factors against the potential for further legal and operational setbacks.

Conclusion

Dow Inc.’s securities class action lawsuit is a microcosm of the chemicals sector’s broader challenges: volatile demand, regulatory scrutiny, and the reputational costs of misaligned corporate messaging. While the company’s cost-cutting initiatives and discounted valuation offer some hope, the legal and financial risks remain acute. As the lead plaintiff deadline approaches, shareholders must act decisively to protect their interests while remaining vigilant about the sector’s evolving risks.

Source:
[1] Dow Inc. Class Action Lawsuit, RGRDLaw [https://www.rgrdlaw.com/cases-dow-inc-class-action-lawsuit-dow.html]
[2] Chemours to Pay $875M Settlement with New Jersey Over PFAS Contamination, AInvest [https://www.ainvest.com/news/chemours-pay-875m-settlement-jersey-pfas-contamination-2508/]
[3] Guest Post: If Looks Could Kill, Dandodiary [https://www.dandodiary.com/2025/09/articles/securities-litigation/guest-post-if-looks-could-kill/]
[4] Dow Q2 2025 Slides Reveal 50% Dividend Cut Amid Persistent Industry Downturn, Investing.com [https://www.investing.com/news/company-news/dow-q2-2025-slides-reveal-50-dividend-cut-amid-persistent-industry-downturn-93CH-4150426]
[5] Bayer ADR Securities Litigation, Cohen Milstein [https://www.cohenmilstein.com/case-study/bayer-securities-litigation/]
[6] Dow Inc. Investors with Substantial Losses Have Opportunity to Lead the Dow Class Action Lawsuit, PR Newswire [https://www.prnewswire.com/news-releases/dow-investor-alert-dow-inc-investors-with-substantial-losses-have-opportunity-to-lead-the-dow-class-action-lawsuit-302542509.html]