Key Takeaways:
Investors face a Sept. 21 deadline to join a securities fraud class action against Cogent Communications Holdings (CCOI) over its optical wavelength backlog.
"We're focused on whether Cogent and its management intentionally promoted wavelength backlog and funnel as a way to misrepresent both the company's actual ability to convert them to earned revenues and the real company-centric wavelength demand," Reed Kathrein, a partner at Hagens Berman Sobol Shapiro LLP, said.
The lawsuit, filed in the U.S. District Court for the District of Columbia as Southfield Fire and Police Retirement System v. Cogent Communications Holdings, covers investors who bought stock between Feb. 29, 2024 and May 1, 2026. The complaint alleges the vast majority of orders in Cogent's optical wavelength backlog were unlikely to become paid orders, that many customers were unable or unwilling to accept delivery, and that the company overstated customer demand and set revenue and margin targets lacking a reasonable basis. It also alleges Cogent lacked the financial capacity to sustain its dividend policy and that CEO David Schaeffer's stock pledging created an undisclosed risk of forced sales.
Cogent's stock fell $6.79, or 29 percent, to close at $16.37 on May 4 after the company reported Q1 2026 results that again disappointed on wavelength revenue and customer connections, following numerous earlier drops tied to the same disclosures. Management conceded customers were pushing out acceptance of installed wavelengths. "We actually provisioned more wavelengths in the quarter than we did in the previous quarter, but the customers did not accept them," the company said.
Cracks in the backlog narrative emerged earlier in the class period. On Feb. 27, 2025, Cogent reported a 20 percent sequential decline in its backlog and removed 1,500 orders because many were more than a year old. On May 8, 2025, it said it had more installation capacity than orders ready to be installed, with management noting the majority of its wavelength funnel "fell out." The company stopped providing backlog data on Feb. 20, 2026, when it reported Q4 and full-year 2025 results.
Cogent, an internet service provider that competes with larger carriers, had touted its wavelength backlog as an indicator of expected growth, a metric the lawsuit challenges as illusory. Kessler Topaz Meltzer & Check and Bronstein, Gewirtz & Grossman are also soliciting affected investors, with the same Sept. 21 lead plaintiff deadline. A lead plaintiff, typically the investor with the largest financial interest, directs the litigation and selects counsel. Investors who do not seek lead plaintiff status can still share in any recovery as absent class members.
The lawsuit adds legal and financial pressure on Cogent as it works through wavelength demand issues. Investors will watch the Sept. 21 deadline for lead plaintiff selection and any settlement or further disclosures.
This article is for informational purposes only and does not constitute investment advice.
