Will a second state AG file a lawsuit similar to Nebraska's against REZI/ADI by end of 2026?

The Q4 earnings call provided no new information on the Nebraska lawsuit — neither settlement nor escalation disclosed — leaving the base probability largely unchanged. The silence is mildly negative for cascade likelihood: if Nebraska were making material progress toward discovery or media-amplified findings, management would likely have faced analyst questions. ADI exclusive brands deceleration to +2% and video surveillance decline attributed to sales cycles (not regulatory) suggest the core exposure mechanism may be weaker than feared, marginally reducing AG interest.

Multi-state AG cascades following a single state filing are historically uncommon without a coordinating mechanism such as an NAAG task force, FTC parallel investigation, or high-profile media event. Nebraska AG Hilgers is a pattern enforcer, but the absence of any public coordination signal through 8+ weeks post-filing is mildly informative. The separation timeline (H2 2026) creates a strategic consideration: other AGs may rationally delay filing against an entity actively restructuring, preferring to assess the Form 10 for quantified exposure before committing resources.

The prior 28% estimate remains well-anchored: FCC Oct 2025 enforcement expansion still creates regulatory momentum, Nebraska AG Hilgers' pattern enforcement history (Temu, Lorex) is real, and approximately 10 months remain for a second filing before Dec 31, 2026. The Q4 earnings call silence on the lawsuit is ambiguous — could reflect advice of counsel rather than absence of risk. The ADI spin-off's Form 10 (expected H1 2026) will be the key near-term catalyst, as quantified Hikvision/Dahua revenue exposure could either attract or repel additional AG interest depending on materiality disclosed.

The Q4 call silence on the Nebraska lawsuit is the dominant new signal, and it is modestly negative for cascade probability. If Nebraska's theory were gaining traction — through discovery findings, press coverage, or inter-AG communication — it would more likely have surfaced in analyst questions. ADI's video surveillance decline (attributed to sales cycles) and exclusive brands deceleration both suggest the Hikvision/Dahua product line may be less commercially prominent than feared, which reduces the consumer harm magnitude that typically motivates AG filings.

The combination of no second filing in the 8+ weeks since the Nebraska lawsuit, no management disclosure on lawsuit progress, and ADI business operating normally (+3% organic) collectively nudge the probability modestly below the prior 28%. State AG resources are finite and Nebraska-style national-security-framed consumer protection suits are resource-intensive; without a clear roadmap from Nebraska's findings or an inter-AG coordinating body, replication by a second state requires independent initiative. The pending ADI spin-off may further complicate the calculus for prospective filing states.

The regulatory environment remains elevated (FCC Oct 2025 expansion, Nebraska AG filing) and 10 months is a meaningful window for a second state action. However, the Q4 earnings data provide no positive catalysts for cascade: the Nebraska lawsuit did not generate investor-visible escalation, ADI's organic growth (+3%) confirms the business is functioning without visible regulatory disruption, and the pending Form 10 gives other AGs a natural reason to monitor rather than act immediately. A slight downward adjustment from 28% is warranted, but the structural factors supporting a cascade remain.

No new evidence of state AG coordination or second filing through Q4 earnings. Nebraska lawsuit silence on earnings call and ADI operating normally are mild downgrade signals. Historical base rate for multi-state AG cascade within 12 months of first filing without coordinating mechanism is below 25%.

Prior probability of 28% was set with limited post-filing data; 8 weeks of no cascade is informative but not conclusive given the 10-month runway remaining. Small downward adjustment justified by absence of escalation signals and ADI deceleration reducing AG interest. Structural risks (FCC momentum, Nebraska precedent) prevent larger downgrade.

Minimal new information warrants minimal adjustment. Q4 earnings confirmed ADI functioning but provided no clarity on Nebraska lawsuit trajectory. The key unresolved driver — whether Nebraska's legal theory gains traction through discovery or settlement — remains unknown. Modest downward drift from 28% to 26% reflects accumulating absence-of-cascade evidence without overweighting it.