Law Firm Robbins Geller Rudman & Dowd LLP announced yesterday that a class action has been commenced in the United States District Court for the Southern District of New York on behalf of purchasers of OSG common stock during the period between March 1, 2010 and October 19, 2012.
The complaint charges OSG, one of the world’s largest oil tanker companies, and certain of its officers and directors with violations of the Securities Exchange Act of 1934.
The complaint alleges that since March 2010, OSG issued materially false and misleading statements regarding the company’s operational status and financial projections. Specifically, they misrepresented and/or failed to disclose the following adverse facts:
(a) that OSG’s financial results were materially false and misleading in violation of Generally Accepted Accounting Principles (GAAP)
(b) that OSG’s tax liability was understated in violation of GAAP;
(c) that OSG’s earnings were overstated and losses were understated in violation of GAAP; and
(d) that OSG’s internal controls were so poor and inadequate that OSG’s reported results were not reliable.
Through a series of partial disclosures in October 2012 that followed the sudden resignation of a member of the OSG Board’s Audit Committee in late September 2012, OSG shocked the market by revealing that their financial position and results were not as they had been portrayed. Specifically, following the announcement of the Board member G. Allen Andreas III’s resignation on October 3, 2012, the market learned of a massive funding gap between OSG’s expiring credit facility of $1.5 billion (in February 2013), and a $900 million forward start credit facility the company had obtained. Estimates from OSG and analysts put the funding gap between $100 million to $300 million.
Then, on October 22, 2012, before the opening of trading, OSG revealed that in connection with the Board’s review of the tax issue, the Board’s Audit Committee concluded that their previously issued financial statements for at least the three years ended December 31, 2011 and associated interim periods, and for the fiscal quarters ended March 31 and June 30, 2012, should no longer be relied upon.
On this news, Standard & Poor’s Ratings Service lowered its credit rating on OSG to triple-C-minus, nine steps into junk territory, from triple-C-plus, while OSG’s stock price declined more than 62%, closing at $1.23 per share, down $2.02 from the October 19, 2012 closing price of $3.25 per share, on unusually high trading of more than twenty times the average daily volume during the Class Period.
The class action seeks to recover damages on behalf of all purchasers of OSG common stock during the Class Period from March 1, 2010 and October 19, 2012.
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