Jan 13, 2018 | Securities Class Action Archive
AZZ Inc. Securities Class Action Lawsuit Filed on Behalf of AZZ Stock Holders
AZZ’s Energy Segment Accounting – “Notification of Late Filing” & Form 8-K Disclosure
Kehoe Law Firm, P.C. previously reported about AZZ’s “Notification of Late Filing” regarding AZZ’s inability to file its Form 10-Q for the quarter ended November 30, 2017 without unreasonable effort or expense for the following reasons:
As previously disclosed in a Form 8-K filed with the Commission on January 9, 2018, [AZZ], upon the recommendation of [AZZ’s] management and in consultation with [AZZ’s] Audit Committee and [AZZ’s] independent registered public accounting firm, BDO USA, LLP, determined that [AZZ] historically should have accounted differently for certain contracts within its Energy Segment. As part of the review, [AZZ] is currently evaluating if there are any significant impacts to [AZZ’s] audited consolidated financial statements for the fiscal years ended February 28, 2015 and 2017, and the fiscal year ended February 29, 2016, as contained in its 2017 Annual Report on Form 10-K and the previously issued unaudited financial statements contained in its Quarterly Reports on Form 10-Q for the quarters ended May 31, 2017 and August 31, 2017. The analysis is ongoing, and [AZZ] cannot yet estimate when it will be completed. [Emphasis added]
[AZZ] is working diligently and expeditiously towards completion of the review. However, due to the time and effort involved and the potential carryover effects of the review on future periods, [AZZ] is unable file its Quarterly Report on Form 10-Q for the quarter ended November 30, 2017 until such review is completed. [Emphasis added]
Securities Class Action Filed on Behalf of AZZ Common Stock Investors Who Purchased, or Otherwise Acquired, AZZ Stock Between April 22, 2015 and January 8, 2018, Inclusive (the “Class Period”)
On January 11, 2018, a class action complaint was filed against AZZ Inc. and certain AZZ officers in United States District Court, Northern District of Texas, Fort Worth Division, for alleged violations of the Securities Exchange Act of 1934. The initial complaint filed in the class action lawsuit (Mullins v. AZZ, Inc., et al, No. 18-00025-Y) alleges that
. . . [t]hroughout the Class Period, [AZZ] Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about [AZZ’s] business, operations, and prospects. Specifically, [AZZ] Defendants made false and/or misleading statements and/or failed to disclose (i) that it misstated revenues for its Energy Segment for the duration of the Class Period; (ii) that it had failed to report revenues in compliance with FASB’s Accounting Standards Codification 605-35-25-92, which says that “the completed contract method may be used as an entity’s basic accounting policy in circumstances in which financial position and results of operations would not vary materially from those resulting from use of the percentage-of completion method (for example, in circumstances in which an entity has primarily short-term contracts),” (iii) that [AZZ] lacked adequate internal controls over financial reporting; (iv) that its purported efforts – over more than two years – to evaluate revenue recognition standards had been an apparent failure; and that (v) as a result of the foregoing, AZZ’s publicly disseminated financial statements were materially false and misleading. [Emphasis added]
AZZ’s Accounting Methodology – AZZ “Historically Should Have Accounted Differently for Certain Contracts Within Its Energy Segment”
On January 9, 2018, AZZ filed SEC Form 8-K with an accompanying press release, “AZZ Inc. to Review Accounting Methodology Resulting in a Delay of the Issuance of its Fiscal Year 2018 Third Quarter Form 10-Q. AZZ Inc. Updates Guidance for Fiscal 2018 Revenue and Earnings per Share,” which stated:
AZZ Inc. . . . a global provider of metal coating services, welding solutions, specialty electrical equipment and highly engineered services, today announced upon the recommendation of [AZZ’s] management and in consultation with [AZZ’s] Audit Committee and [AZZ’s] independent registered public accounting firm, BDO USA, LLP, on January 4, 2018 determined that [AZZ] historically should have accounted differently for certain contracts within its Energy Segment. As disclosed in [AZZ’s] 2017 Annual Report on Form 10-K, revenue was historically recognized for the Energy Segment upon transfer of title and risk to customers or based upon the percentage of completion method of accounting for electrical products built to customer specifications. [AZZ] has determined that, in the case of contracts for which revenue was recorded upon contract completion and transfer of title, [AZZ] instead should have applied the percentage of completion method. [Emphasis added]
Consequently, according to the press release:
. . . [AZZ] is currently reviewing whether its historical accounting for these contracts differs materially from the percentage-of-completion method and if there are any significant impacts to [AZZ’s] audited consolidated financial statements for the fiscal years ended February 28, 2015 and 2017, and the fiscal year ended February 29, 2016, as contained in its 2017 Annual Report on Form 10-K and the previously issued unaudited financial statements contained in its Quarterly Reports on Form 10-Q for the quarters ended May 31, 2017 and August 31, 2017. The analysis is ongoing, and [AZZ] cannot yet estimate when it will be completed. However, [AZZ] is working diligently and expeditiously to complete the review and will provide any updates when and if they become available. Accordingly, [AZZ] cannot yet conclude upon the materiality of any potential adjustments. As the review is ongoing, [AZZ] is currently unable to file its Quarterly Report on Form 10-Q for the quarter ended November 30, 2017. [Emphasis added]
Steep Decline of AZZ Stock Share Price
On the news pertaining to AZZ’s late filing, AZZ’s share price fell sharply $3.14, or 6.20%, to close at $47.50 on January 9, 2018, down from a $50.64 close on January 8, 2018.
AZZ Stock Shareholders – Purchasers or Acquirers of AZZ Stock
If you purchased, or otherwise acquired, AZZ stock shares during the Class Period April 22, 2015 through January 8, 2018, inclusive, and have questions or concerns about your potential rights or legal claims, please contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected], complete the form above on the right or e-mail [email protected].
Jan 11, 2018 | Securities Class Action Archive
Matthews International Corp. (NASDAQ:MATW)
On January 11, 2018, AlphaWeek reported (“Spruce Point Shorts Matthews International”) that Spruce Point Capital Management (“Spruce Point”) released a statement detailing a “strong sell” position for Matthews International Corp.
Spruce Point on Matthews International: “Poorly Organized,” “Declining Financial Performance,” “Accounting and Financial Control Weakness,” & “Nearly $1 Billion of Debt”
As reported by AlphaWeek from Spruce Point’s January 11, 2018 MATW statement:
Spruce Point has conducted a forensic financial review of MATW and believes it to be a poorly organized company suffering from operational problems, declining financial performance, accounting and financial control weakness, and is excessively levered with nearly $1 billion of debt and limited covenant cushion. Based on our research opinions, [Spruce Point Capital] believe[s] investors and the public would be best served with the immediate resignation of MATW’s CEO, CFO and Controller. [Emphasis added]
As a result, [Spruce Point Capital] . . . issued a “Strong Sell” opinion and a long-term price target of approximately $18.50 – $24.50 per share, or approximately 55% to 65% downside risk. [Emphasis added]
Further, as reported by AlphaWeek from Spruce Point’s MATW release:
Poorly Organized Company With Significant Fundamental Headwinds:
Matthews Int’l . . . is comprised of three unrelated businesses in the death care (“Memorialization”), branding and packaging services (“SGK Brand Solutions”), and Industrial Technologies. In [Spruce Point’s] view, each business is mediocre and struggling from a variety of issues, resulting in organic sales to decline in aggregate. In Memorialization, cremation rates are rising causing less casket sales, cheaper imports from China are causing price and margin compression, while virtual memorials are an easy substitute for MATW’s bronze/granite structures. Matthews SGK business is being weighed down by spending deferrals of consumer packaging companies and FDA regulatory delays. Its Industrial Technology business (just 9% of sales) has margins near all-time lows while management has been investing for years into R&D for “new product development” with little details provided to investors; at best, it is a carrot to bait investors for some upside amongst its portfolio of lagging businesses[.] [Emphasis Added]
Recent Acquisitions Have Failed To Deliver:
Hoping to spark growth, MATW has completed 10 acquisitions since FY 2013 and spent $1.0 billion. Its two largest acquisitions were Schawk ($616m/Brand Solutions/2014) and Aurora Products ($219m/Memorialization/2015). Based on our research, these deals have failed miserably to meet expectations. As a result, MATW is bloated and saddled with declining organic growth of 1-3% in Memorialization and 3-5% in Branding. All along, MATW has been promoting how its ERP investment would yield great benefits and allow for seamless acquisitions, but after six years of implementation (average implementation time is 21 months), investors have no clue how much MATW has spent on this project, and not a single accounting disclosure has been made on its software amortization policies. Don’t be shocked that years ago Schawk admitted software capitalization accounting issues[.] [Emphasis added]
Mounting Evidence of Dubious Financial Results:
MATW has taken classic measures to obscure its problems such as realigning segment reporting and promoting highly “adjusted” figures. MATW has reported $176.8m of pre-tax charges since 2012 (with ~$165m related to acquisitions and strategic cost reductions). Charges have totaled a whopping 16% of its deal costs. When put into context of other successful calls Spruce Point has made identifying companies struggling to integrate targets (eg. NCR, ACM, ECHO, CECE, GEF), MATW is the worst we’ve ever seen! When we look closer at its operational footprint, we find little evidence that it has accomplished anything. SG&A margin is rising as are other fixed cost of operations. Not surprisingly, management is now touting “adjusted free cash flow” metrics, which we think overstates 3yr cumulative cash flow by nearly 30%. With sales slowing, and accounts receivables ballooning, Matthews quietly initiated an accounts receivable securitization facility in April 2017; in our view, a tacit admission by the Company its cash flow isn’t as robust as it appears[.] [Emphasis added]
AlphaWeek also reported about Spruce Point’s discussion of MATW’s “debt ballooning to near a billion dollars with little covenant cushion,” MATW’s “serious financial control issues,” and Spruce Point’s view that its “sum-of-parts valuation implies $18.50-$24.50 or approximately 55% – 65% downside.”
Matthews International Share Price Decline
On the news of Spruce Point’s information, MATW’s share price fell sharply during intraday trading on January 11, 2018.
Matthews International Shareholders
On behalf of Matthews International Corp. investors, Kehoe Law Firm, P.C. is investigating whether MATW engaged in securities fraud or other unlawful business practices. MATW investors with questions or concerns can contact John Kehoe, Esq, (215) 792-6676, Ext. 801, [email protected], complete the form above on the right or e-mail [email protected].
Jan 11, 2018 | Securities Class Action Archive
Ekso Bionics Class Action – Federal Securities Lawsuit Filed Against Richmond, CA-Based Ekso
Ekso Bionics Class Action on Behalf of Purchasers or Acquirers of Ekso Bionics Holdings, Inc. Common Shares
On January 10, 2018, a federal class action lawsuit was filed in United States District Court (Cheehy v. Ekso Bionics Holdings, Inc. et al) against Ekso Bionics Holdings, Inc. on behalf of a class of purchasers or acquirers of the common shares of Ekso between March 15, 2017 and December 27, 2017, both dates inclusive (the “Class Period”).
The Ekso Bionics class action seeks to recover damages for Ekso (NASDAQ:EKSO) shareholders as a result of Ekso Bionics’s violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
Ekso Bionics Holdings, Inc. is a Northern California-based company and an alleged “worldwide pioneer in the field of robotic exoskeletons” which is “committed to developing the latest technology and engineering to help people rethink current physical limitations and achieve the remarkable.” Ekso’s “products unlock human strength, endurance, and mobility potential, with broad applications across medical and industrial markets.”
Ekso Bionics Class Action – Alleged False and Misleading Statements & Material Weakness in Internal Control
According to the Cheehy v. Ekso Bionics Holdings, Inc. et al class action complaint:
Throughout the Class Period, [Ekso Bionics] Defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Ekso had a material weakness in its internal control over financial reporting; (ii) accordingly, Ekso’s disclosure controls and procedures were not effective; and (iii) as a result of the foregoing, Ekso’s public statements were materially false and misleading at all relevant times.
On December 14, 2017, Ekso filed a current report on Form 8-K with the SEC, advising investors that ‘[Ekso’s] internal control over financial reporting as of December 31, 2016 should no longer be relied upon and that a material weakness in [Ekso’s] internal control over financial reporting existed as of such date.’ Specifically, Ekso stated that its announcement was due to a reevaluation of [Ekso’s] information technology (“IT”) controls by OUM & Co. LLP (“OUM”), [Ekso’s] auditor. Ekso stated that it intended ‘to amend [its] Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and [its] Quarterly Reports on Form 10-Q for the periods ended March 31, 2017, June 30, 2017 and September 30, 2017 to reflect the conclusion by [Ekso] management that there was a material weakness in internal control over financial reporting and that [Ekso’s] disclosure controls and procedures were not effective as of the end of the periods covered by these reports.’
Ekso Share Price Falls on News of Material Weakness in Internal Control Over Financial Reporting
According to the Ekso class action securities complaint, Ekso’s share price, on the news regarding Ekso’s material weakness in Ekso’s internal control over financial reporting, fell $0.15, or 6.17%, to close at $2.28 on December 15, 2017.
Ekso Share Price Falls After Ekso Files Amended Annual & Quarterly Reports
According to the Ekso class action securities complaint, post-market, on December 27, 2017, Ekso’s share price, on the news that Ekso filed an amended annual report for 2016 and amended quarterly reports for the first three quarters of 2017 on Form 10-Q fell $0.34, or over 13%, to close at $2.23 on December 28, 2017.
Ekso Bionics Shareholders Who Have Suffered Losses
If you purchased, or otherwise acquired, the common stock of Ekso Bionics Holdings, Inc. Ekso between March 15, 2017 and December 27, 2017, both dates inclusive, and have questions or concerns about your legal rights or potential legal claims, please contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected], complete the form above on the right or e-mail [email protected].
Jan 10, 2018 | Securities Class Action Archive
AZZ Inc. “Notification of Late Filing” – Inability to File Third Quarter 10-Q
Kehoe Law Firm, P.C. is investigating claims on behalf of AZZ shareholders (NYSE:AZZ) to determine whether AZZ Inc. and certain AZZ officers or directors violated federal securities laws or engaged in other unlawful business practices.
On January 9, 2018, AZZ Inc. filed SEC Form 12b-25, “Notification of Late Filing,” regarding AZZ’s inability to file its Form 10-Q for the quarter ended November 30, 2017 without unreasonable effort or expense for the following reasons:
As previously disclosed in a Form 8-K filed with the Commission on January 9, 2018, [AZZ Inc.], upon the recommendation of [AZZ’s] management and in consultation with [AZZ’s] Audit Committee and the [AZZ’s] independent registered public accounting firm, BDO USA, LLP, determined that [AZZ] historically should have accounted differently for certain contracts within its Energy Segment. As part of the review, [AZZ] is currently evaluating if there are any significant impacts to [AZZ’s] audited consolidated financial statements for the fiscal years ended February 28, 2015 and 2017, and the fiscal year ended February 29, 2016, as contained in its 2017 Annual Report on Form 10-K and the previously issued unaudited financial statements contained in its Quarterly Reports on Form 10-Q for the quarters ended May 31, 2017 and August 31, 2017. The analysis is ongoing, and [AZZ Inc.] cannot yet estimate when it will be completed. [Emphasis added]
[AZZ Inc.] is working diligently and expeditiously towards completion of the review. However, due to the time and effort involved and the potential carryover effects of the review on future periods, [AZZ] is unable file its Quarterly Report on Form 10-Q for the quarter ended November 30, 2017 until such review is completed. [Emphasis added]
AZZ’s Accounting Methodology – AZZ “Historically Should Have Accounted Differently for Certain Contracts in Its Energy Segment”
On January 9, 2018, AZZ filed SEC Form 8-K with an accompanying press release, “AZZ Inc. to Review Accounting Methodology Resulting in a Delay of the Issuance of its Fiscal Year 2018 Third Quarter Form 10-Q. AZZ Inc. Updates Guidance for Fiscal 2018 Revenue and Earnings per Share,” which stated:
AZZ , . . . a global provider of metal coating services, welding solutions, specialty electrical equipment and highly engineered services, today announced upon the recommendation of the [AZZ’s] management and in consultation with [AZZ’s] Audit Committee and [AZZ’s] independent registered public accounting firm, BDO USA, LLP, on January 4, 2018 determined that [AZZ] historically should have accounted differently for certain contracts within its Energy Segment. As disclosed in [AZZ’s] 2017 Annual Report on Form 10-K, revenue was historically recognized for the Energy Segment upon transfer of title and risk to customers or based upon the percentage of completion method of accounting for electrical products built to customer specifications. [AZZ] has determined that, in the case of contracts for which revenue was recorded upon contract completion and transfer of title, [AZZ] instead should have applied the percentage of completion method. [Emphasis added]
Consequently, according to the press release:
. . . [AZZ] is currently reviewing whether its historical accounting for these contracts differs materially from the percentage-of-completion method and if there are any significant impacts to [AZZ’s] audited consolidated financial statements for the fiscal years ended February 28, 2015 and 2017, and the fiscal year ended February 29, 2016, as contained in its 2017 Annual Report on Form 10-K and the previously issued unaudited financial statements contained in its Quarterly Reports on Form 10-Q for the quarters ended May 31, 2017 and August 31, 2017. The analysis is ongoing, and [AZZ] cannot yet estimate when it will be completed. However, [AZZ] is working diligently and expeditiously to complete the review and will provide any updates when and if they become available. Accordingly, [AZZ] cannot yet conclude upon the materiality of any potential adjustments. As the review is ongoing, [AZZ] is currently unable to file its Quarterly Report on Form 10-Q for the quarter ended November 30, 2017. [Emphasis added]
AZZ Inc. Stock Share Price Falls Sharply
On the news pertaining to AZZ’s late filing, AZZ’s share price fell sharply $3.14, or 6.20%, to close at $47.50 on January 9, 2018.
AZZ Inc. Shareholders
If you purchased, or otherwise acquired, AZZ securities and have questions or concerns about Kehoe Law Firm’s investigation, please contact John Kehoe, Esq, (215) 792-6676, Ext. 801, [email protected], complete the form above on the right or e-mail [email protected].
Jan 9, 2018 | Securities Class Action Archive
InterOil Corporation (NYSE:IOC) & Exxon Mobil Corporation (NYSE:XOM) Named Defendants in a Securities Class Action Lawsuit
On January 2, 2018, a class action lawsuit, alleging InterOil, InterOil’s Board of Directors and Exxon Mobil Corporation violated the Securities Act of 1933 (Block v. InterOil Corporation), was filed in United States District Court, Northern District of Texas, Dallas Division.
Acquistion of InterOil Corporation Shares – Exxon Mobil Shares Worth $45 and a Contingent Resource Payment
The class action lawsuit was filed on behalf of all persons who purchased, or otherwise acquired, Exxon Mobil Corporation (“Exxon Mobil”) shares worth $45.00 and a Contingent Resource Payment (“CRP”) for each outstanding InterOil Corporation share in connection with the acquisition of all of the issued and outstanding shares of InterOil by an affiliate of Exxon Mobil Corporation on or about February 22, 2017.
InterOil Corporation’s Primary Assets
According to the class action complaint:
InterOil engaged in the exploration, appraisal and development of hydrocarbon resources. Its primary assets were (i) a gross 36.5% interest in petroleum retention license 15 (“PRL 15”) in the Gulf Province of PNG, which includes the world-class Elk and Antelope gas fields (the “PRL 15 License Interest”), and (ii) the right to receive substantial future payments from French oil and gas supermajor TOTAL, S.A. (“TOTAL”), arising out of TOTAL’s 2014 purchase from InterOil of a gross 40.19% license interest in PRL 15 (the “TOTAL Payments”). The TOTAL Payments are calculated based on certified “in the ground” estimates of the total hydrocarbon resources of the Elk and Antelope gas fields to be prepared by certain designated independent third-party estimators according to an industry standard commonly referred to as “2C” (the “PRL 15 2C Resource Estimate”). Under the TOTAL sale documents, the process of preparing the PRL 15 2C Resource Estimate is referred to as the “Interim Resource Certification.” InterOil’s additional assets included other interests in petroleum exploration and retention licenses covering an area of approximately 16,000 square kilometers in the Gulf Province of PNG. InterOil was the operator of PRL 15 until TOTAL assumed operations on August 1, 2015. [Emphasis added]
InterOil Class Action – The Acquisition’s Alleged False and Misleading Information Circular
According to the class action complaint:
On or around January 13, 2017, Defendants disseminated [a] false and misleading Information Circular to InterOil shareholders. InterOil filed the Information Circular [“Management Information Circular for a Special Meeting of Holders of Common Shares, Options and Restricted Share Units of InterOil Corporation with Respect to an Arrangement Involving InterOil Corporation and Exxon Mobil Corporation”] with the SEC as Exhibit 99.2 to its Form 6-K on January 17, 2017. By this date, Antelope-7 had drilled 143 meters below the base carbonate case but failed to intersect the Antelope Field, and so could provide no support for extending the projected western boundary of the Antelope Field beyond its assumed location before drilling Antelope-7. Thus, Defendants knew or should have known on this date that (i) Antelope-7 had not substantively addressed the volume uncertainty or established the limits of the Antelope reservoir and so would almost certainly have no material upside impact or a negative impact on the overall projected size of the Antelope Field, the eventual PRL 15 2C Resource Estimate or, most importantly, the CRP, and (ii) consequently, the new CRP cap of 11 tcfe would almost certainly provide no additional consideration for InterOil shareholders above the original CRP cap of 10 tcfe. [Emphasis added]
Just like Antelope-7, the side track well experienced a series of misses of its key geological targets in January and February 2017. On January 31, 2017, TOTAL announced the side track well reached 1,980 meters without intersecting the Antelope reservoir. Then, on February 19, 2017, InterOil announced that the side track well reached its target depth of 2,383 meters without intersecting the Antelope reservoir. [Emphasis added]
Meanwhile, on February 14, 2017, InterOil shareholders approved the Revised Plan of Arrangement based on the false and misleading Information Circular. The Supreme Court of Yukon approved the [a]cquisition pursuant to the Revised Plan of Arrangement on February 20, 2017. Due to the InterOil shareholders’ approval, the [a]cquisition closed on February 22, 2017, with InterOil shareholders purchasing $45.00 worth of Exxon shares and the CRP with each outstanding InterOil share on a fully taxable basis. [Emphasis added]
The [a]cquisition amounted to a sale of Exxon shares by Defendants to InterOil shareholders by means of a false and misleading prospectus, as these terms are used by §12(a)(2) of the Securities Act. [Emphasis added]
Antelope7’s Impact on the CRP – Alleged Material Omissions
The complaint alleges that “[t]he Information Circular approved by Exxon and InterOil omitted the material fact that Antelope-7 would almost certainly have no impact or a negative impact on the Interim Resource Certification and, thus, the size of the CRP. Rather than disclose this fact, the Information Circular misleadingly stated on several occasions that Antelope-7 could have a positive or negative impact on the Interim Resource Certification without indicating which outcome was more likely. As a result, InterOil shareholders were misleadingly led to believe there was a good chance Antelope-7 would positively impact the size of the CRP and, thus, the merger consideration.” [Emphasis added]
The Information Circular issued in connection with the acquisition, according to the complaint, omitted material facts and contained material misstatements regarding Antelope-7’s impact on the CRP, the actual value of the new CRP cap, and the placement of Antelope-7. Further, the class action complaint alleges that the omissions and misstatements were material to InterOil shareholders, because they impacted the perceived value of the CRP and, consequently, prevented InterOil shareholders from accurately valuing the CRP and making an informed vote on the acquisition.
Purchasers or Acquirers of Exxon Common Stock and the CRP Pursuant to the Information Circular in Connection with the InterOil Acquisition
If you purchased, or otherwise acquired, Exxon Mobile Corporation shares worth $45.00 and a Contingent Resource Payment for each outstanding InterOil Corporation share in connection with the acquisition of all issued and outstanding InterOil shares and have questions or concerns about your potential legal rights or claims, please contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected], complete the form above on the right or e-mail [email protected].
Jan 9, 2018 | Securities Class Action Archive
OSIS Stock – Shares Downgraded From a Buy to Hold Rating
On January 8, 2018, Registrar Journal reported that “Zacks Investment Research downgraded shares of OSI Systems . . . from a buy rating to a hold rating in a report issued on Thursday morning.”
On January 9, 2018, The Lincolnian Online reported that “BidaskClub upgraded shares of OSI Systems . . . from a strong sell rating to a sell rating in a research report released on Saturday.”
The Lincolnian Online also reported that “Zacks Investment Research lowered shares of OSI Systems from a buy rating to a hold rating in a report on Wednesday, November 1st.”
OSIS Stock – OSI Systems, Inc. Securities Class Action Investigation
Kehoe Law Firm, P.C. continues to investigate whether OSI Systems, Inc. violated the securities laws or breached its fiduciary duties to shareholders. As previously reported, a securities class action lawsuit was filed on behalf of individuals or entities that purchased OSI Systems, Inc. securities between August 16, 2013 and December 6, 2017, inclusive (the “Class Period”).
The OSIS class action complaint alleges that throughout the Class Period, OSIS Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about OSI Systems’ business, operations, and prospects.
Specifically, OSI Systems Defendants allegedly failed to disclose that: (1) OSI Systems acquired the Albania concession through bribery or other illicit means; (2) OSI transferred 49% of its project company associated with the Albania concession, S2 Albania SHPK, an entity purportedly worth millions, for consideration of less than $5.00; (3) OSI engaged in other illegal acts, including improper sales and cash payments to government officials; (4) these practices caused OSI Systems to be vulnerable to potential civil and criminal liability, and adverse regulatory action; and (5) as a result, OSI Systems Defendants’ statements about OSI’s business, operations, and prospects, were materially false and/or misleading and/or lacked a reasonable basis.
On December 6, 2017, Muddy Waters Research published a report on OSI entitled “OSIS: Rotten to the Core.” In the report, Muddy Waters Research alleges that there was corruption in the 2013 award of OSI’s Albania concession. Muddy Waters Research claims that while the concession “has an estimated top line lifetime value of $150 million to $250 million,” OSI “likely bribed somebody by giving half of it away for $4.50.” Further, Muddy Waters Research reported that “[t]here was an unannounced transfer of 49% of OSIS’s project company, S2 Albania SHPK, to a holding company owned by an Albanian doctor, for consideration of less than $5.00.”
Additionally, Muddy Waters Research reported that “[t]o be clear, this company (S2 Albania SHPK) is the company to which all rights and obligations under the turnkey contract award belong, so 49% of the company is presumably worth many millions of dollars. It appears to [Muddy Waters Research] that [OSI’s] accounts do not reflect the transfer – there are no deductions for non-controlling interests in the income statement, and February 2017 bond offering documents appear to show the subsidiary as 100% owned by [OSI].”
Muddy Waters Research also reported that “[b]eyond the turnkey contracts, investigators’ interviews with former employees yielded numerous anecdotes indicating [OSI] is rotten to the core. Former employees alleged a list of rot they experienced at Rapiscan, including their concern about possibly going to prison, knowledge of improper sales, cash payments to government officials, fraud in a significant contract, and that [OSI] had narrowly avoided being debarred from doing business with the U.S. government.”
On this news, the OSIS stock price fell $24.55 per share, or 29.2%, to close at $59.52 per share on December 6, 2017, on unusually heavy trading volume.
Tumbling OSIS Stock Shares – Los Angeles Business Journal Reports
On December 7, 2017, the Los Angeles Business Journal reported (“Short Seller’s Bet Against OSI Systems Sent Stock Price Tumbling”) that “. . . OSI Systems Inc. saw its shares tumble more than 30 percent . . . following a short seller’s declaration that the company was “rotten to the core.” The story also reported that
Carson Block, founder and chief investment officer of hedge fund Muddy Waters Capital in San Francisco alleged on Bloomberg TV that he had, “smoking-gun proof that, when this company got a turn-key contract a few years ago in Albania, worth $150-$250 million top line, that they paid a bribe or kickback of almost half of that concession. To me, this is damning evidence.” The Muddy Waters website states that it’s likely OSI’s accounts are misstated as a result.
Block cited former OSI employees as sources for his claim, according to the hedge fund’s website. He said he was short selling the company. Shorting is a way for traders to turn a profit when a stock’s price declines.
Muddy Waters also estimates that 50 to 55 percent of OSI’s EBITDA comes from one contract in Mexico that is up for renewal in 2018.
OSI Systems, Inc.
According to OSIS’ Form 10-K for the fiscal year ended June 30, 2017:
OSI Systems, Inc., together with [its] subsidiaries, is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. [OSIS] sell[s] [its] products and provide[s] related services in diversified markets, including homeland security, healthcare, defense and aerospace. [The] company was originally incorporated in 1987 in California. In March 2010, [OSIS] reincorporated . . . in the State of Delaware. [OSIS’] principal office is located at 12525 Chadron Avenue, Hawthorne, California 90250.
[OSIS has] three operating divisions: (a) Security, providing security and inspection systems, turnkey security screening solutions and related services; (b) Healthcare, providing patient monitoring, diagnostic cardiology, and anesthesia delivery and ventilation systems; and (c) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for the Security and Healthcare divisions, as well as to external original equipment manufacturer . . . customers and end users for applications in the defense, aerospace, medical and industrial markets, among others.
OSIS Securities Holders (NASDAQ:OSIS)
If you purchased or otherwise acquired OSIS stock and wish to discuss your potential legal rights or claims, please contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected] or e-mail [email protected].
