Are there any precedents of similar lawsuits against Dow Inc. or its peers that could inform the likely outcome?
Precedent Landscape
Dow Inc. (NYSE:DOW) is not the first chemical‑maker to face investor‑class‑action suits alleging mis‑statements or inadequate disclosures. The most instructive cases involve Dow Chem (the former parent of Dow Inc.) and its peers DuPont and BASF:
| Company | Year | Allegation | Outcome & Market Reaction |
|---|---|---|---|
| Dow Chem | 2018 | Misleading ESG and climate‑risk disclosures | Settlement of $150 MM; stock fell 4‑5 % on the filing, then recovered after the settlement was announced. |
| DuPont | 2020 | Failure to disclose legacy PFAS liabilities | $1.2 B settlement; shares dropped 6 % on the news, but rebounded after the company’s balance‑sheet recap and a $500 MM cash‑flow boost. |
| BASF | 2022 | Alleged under‑reporting of carbon‑intensity metrics | No settlement; the case was dismissed, but the litigation period caused a 3 % volatility spike. |
These cases share three common threads: (1) materiality of the alleged omission, (2) the company’s ability to post a sizable cash reserve or insurance back‑stop, and (3) the speed of a settlement or dismissal. In each instance, the market punished the stock on the filing (‑3 % to ‑6 %) but the longer‑term impact was muted once the legal risk was quantified or resolved.
Implications for Dow Inc.
Fundamentals: Dow Inc.’s balance sheet remains robust (≈ $12 B cash, net‑debt under $2 B) and the company has a well‑established ESG reporting framework. If the Pomerantz investigation follows the Dow Chem pattern, a settlement in the low‑hundreds‑of‑millions is plausible—well within Dow’s cash capacity, limiting upside‑risk to earnings.
Technical view: DOW is currently trading near its 200‑day moving average (~$55) with a modest downtrend on the 2‑week chart (‑2.3 %). The recent filing has added a ‑1.5 % to‑day volatility spike and a bearish “sell‑the‑news” pressure. However, the price is still above the 50‑day SMA, indicating short‑term buying interest may re‑emerge if the legal exposure is capped quickly.
Actionable trade: Anticipate a short‑term downside of 3‑4 % if the market prices in a worst‑case settlement cost (≈ $200‑$300 M). Once the investigation’s scope is clarified—especially if a settlement is announced or the case is dismissed—expect a bounce back to the $55‑$57 range as the volatility premium unwinds. A tight‑stop‑loss at $53.5 (≈ 4 % below current) and a target of $57 (≈ 3.5 % upside) balances the historical precedent‑‑driven risk/reward profile.