COGENT CLASS ACTION LAWSUIT: A METICULOUS INVESTOR PLAYBOOK [2026]

Cogent is a global facilities-based provider of low-cost, high-speed internet access, private network services, optical wavelength and transport services, and data center colocation space and power.

The Cogent class action lawsuit alleges that defendants throughout the Class Period made materially false and misleading statements because they failed to disclose the following adverse facts pertaining to Cogent’s business, operations, and financial condition, which were known to or recklessly disregarded by defendants: (i) that the vast majority of the purported orders in Cogent’s optical wavelength “backlog” were unlikely to ever result in a paid order; (ii) that large quantities of the customers in Cogent’s purported optical wavelength “backlog” were unable or unwilling to accept delivery even if Cogent was in a position to provision the wavelength in a timely manner; (iii) that, as a result of (i)-(ii) above, defendants had materially misrepresented customer demand for Cogent’s optical wavelength services and the nature of Cogent’s purported “backlog” of wavelength orders; (iv) that, as a result of (i)-(iii) above, Cogent was not on track to achieve its revenue and margin targets and such targets lacked a reasonable basis in objective fact; (v) that Cogent did not have the financial capacity or business fundamentals to maintain its long-standing dividend policy; and (vi) that there was a material, undisclosed risk that defendant David Schaeffer would be forced to sell vast quantities of Cogent stock as a result of his high-risk pledging activities, thereby further depressing the price of Cogent stock in the event the truth regarding Cogent’s “backlog,” demand issues, and financial position were ever revealed.

On February 27, 2025, Cogent announced its fourth quarter 2024 and year-end 2024 financial results, disclosing that Cogent’s annual revenue run rate was only $28 million and its backlog (as explained on the accompanying earnings call that day) declined sequentially from 3,400 in the prior quarter to 2,700 in the fourth quarter.  Management explained that Cogent had removed 1,500 orders from its backlog because many orders were more than a year old.  Additionally, growth in wavelength connections slowed from 287 net additions in third quarter 2024 to 77 net additions in fourth quarter 2024.  On this news, the price of Cogen stock fell 10% according to the Cogent class action lawsuit.

Then, on May 8, 2025, Cogent announced its first quarter 2025 financial results, reporting that revenues in the wavelength business were lower than expected, which had negatively impacted Cogent’s earnings, margins, and leverage.  Although Cogent had expanded its offering of optical wavelength services to over 880 data centers across North America,  from fourth quarter 2024.  Executives further revealed that Cogent now had the capacity to provision 500 orders per month but only expected to be able to convert 5% of its 3,400 order backlog.  On this news, the price of Cogent stock fell 7% according to the Cogent class action lawsuit.

Thereafter, on August 7, 2025, Cogent announced its second quarter 2025 financial results, revealing that Cogent only added 147 net connections during the quarter (compared to 204 in first quarter 2025), which was far less than defendants’ prior claims that Cogent would be installing 4% to 5% of its 3,433 wavelength backlog (approximately 155 wavelengths) per month.  On this news, the price of Cogent stock fell 19% on August 7, 2025 and declined a further 13% on August 8, 2025 according to the Cogent class action lawsuit. 

Then, on November 6, 2025, Cogent announced its third quarter 2025 financial results, reporting that wavelength revenue increased sequentially to $10.2 million and wavelength customer connections only increased sequentially by 281 connections from 1,469 to 1,750.  Cogent further revealed that it paused stock buybacks and reduced its quarterly dividend from $1.015 per share to $0.02 per share – a reduction of 98% – ending Cogent’s streak of 52 straight quarters of increasing its dividend.  On this news, the price of Cogent stock fell 56% from November 6, 2025 through November 13, 2025, as the market digested the adverse revelations and their impact to Cogent’s business and prospects.

Subsequently, on February 20, 2026, Cogent announced its fourth quarter 2025 financial results, disclosing that wavelength revenue increased sequentially to $12.1 million for the quarter and wavelength customer connections increased sequentially by 314 connections from 1,750 to 2,064.  In a break with Cogent’s prior practice, defendants refused to provide a specific backlog amount on the accompanying earnings call.  On this news, the price of Cogent stock fell 29% according to the Cogent class action lawsuit.

Finally, the Cogent class action lawsuit alleges that on May 4, 2026, Cogent announced its first quarter 2026 financial results, reporting wavelength revenue had increased sequentially to $13.6 million for the quarter and that its wavelength customer connections had increased sequentially by just 199 connections from 2,064 to 2,263.  During the corresponding earnings call, defendant Schaeffer conceded: “On wavelength installs, we have seen a variety of customers pushing out their acceptance of wavelengths.  We actually provisioned more wavelengths in the quarter than we did in the previous quarter, but the customers did not accept them.  Decision to push out acceptance is being driven by constraints.” 

On this news, the price of Cogent stock fell 29% according to the Cogent class action lawsuit.