Michigan Pension Plan Sues LPL Financial for $115M

The Charter Township of Clinton Police and Fire Retirement System is suing LPL Financial Holdings Inc. (LPLA) for $115M. In the class action securities case, the plaintiff contends that a stock buyback program cost the firm and its shareholders that amount.

Company shares closed trading at $42.91 on October 29 when LPL announced the $500M program. Less than two months later, its stock began to drop in price. The stock was trading at $25.08/share yesterday morning.

The program was supposed to improve shareholder value. The following month, LPL said it had entered into $700M of new term loans while extending $631M of existing debt to pay for the share repurchase plan. Then, in December, the company said it had arrived at an early completion of the plan.

LPL said that private equity manager TPG Capital had spoken with Goldman Sachs (GS), which was LPL’s investment bank, regarding the selling of shares and that this would resolve the accelerated buyback even more rapidly. The plaintiff contends that in the process of sharing 4.3M shares of LPL common stock to Goldman at $43.27/share through the repurchase program, TPG made $187M in proceeds.

Also named in the complaint are LPL Chairman and CEO Mark Casady and CFO Matthew Audette. The two men made positive comments about the repurchase plan and the firm during a conference in December even though, contend the plaintiffs, alternative investment revenues would decline “75% year-over-year.” The Michigan pension fund believes that the purportedly false statements caused LPL’s common stock to trade at artificially high prices after that through December 11. It said that Audette and Casady were aware that certain adverse facts were not being disclosed and that the positive representations they issued were “materially false and misleading.”

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LPL stock buyback cost shareholders $115 million: lawsuit, InvestmentNews, March 23, 2016

LPL Financial Sued By Michigan Pension Over Buyback Plan Timing, Barron’s, March 24, 2016