A number of lawsuits have been brought against LPL Financial (LPLA) after its stock price fell. There is the securities case brought by the Charter Township of Clinton Police and Fire Retirement System, which is a Michigan pension fund. Also, in New York last March, a number of lawyers filed a shareholder lawsuit.
Both securities cases want damages that shareholders of record would have sustained between 12/8/15 and 2/11/16. A major allegation is that LPL misled investors to raise its stock price while putting through a $250M share buyback plan that benefited one private equity investor.
According to the Michigan pension fund, LPL CFO Matthew Audette and LPL CEO Mark Casady took part in a scam to let private equity investment firm TPG Capital sell LPL shares at a price that was artificially inflated. The NY shareholder lawsuit is accusing the independent brokerage firm of issuing statements that were materially false and misleading to investors and not disclosing that its clients’ assets and gross profits were becoming weaker.
Addressing the allegation, Casady downplayed the share buyback program’s timing and execution that allowed the private equity investor to sell 4.3M million stock shares back to the firm soon before the shares, as described by InvestmentNews, “went into a tailspin.” He said the stock buyback happened under a set of expectations that was reasonable.
The buyback was announced at the end of October, one month after Marcato Capital, an activist investor, disclosed that it had bought a 6.3% stake in LPL. The firm borrowed $700M the following month—$500M was for the stock repurchase. Goldman Sachs (GS) was retained to deal with the buyback, which Casady claims was not because Marcato purchased a stake in the company.
Two days after an investment conference on December 8, TPG Capital sold its stock at $43.27/share, making $187M. Soon after, LPL shares declined 62% over nine weeks. Over half of the IBD’s share drop—35%—took place on February 12, which was one day after it reported poor earnings for the fourth quarter.
The shareholder lawsuit claims that if LPL had only waited until after that announcement to purchase the TPG shares, investors could have saved $115M.
Meantime, LPL Financials Holdings Inc. is also dealing with a lawsuit brought in California for certain shareholders. The Shareholders Foundation is claiming alleged securities law violations. According to the press release announcing the complaint, before 2010 TPG Capital and private equity firm Hellman & Friedman LLC were the majority owners of the firm. Following the IPO, TPG Capital kept a substantial ownership stake in LPL Financial Holdings.
The plaintiff contends that the defendants issued statements that were misleading and false and did not disclose certain information about LPL Financial Holdings’ prospects and business or that client assets were deteriorating and there would be a decline of billions of dollars.
The lawsuit takes issue with LPL Financial Holdings Inc.’s latest financial results and contends that the earnings per share were way under the consensus analyst estimates of 51 cents/share.
Contact The SSEK Partners Group today. We represent high net worth individuals and institutional investors with securities fraud claims and lawsuits.
LPL Financial Sued By Michigan Pension Over Buyback Plan Timing, Barron’s, March 24, 2016
The LPL stock buyback that launched a lawsuit, InvestmentNews, April 3, 2016