Dakota Plains Holdings faces securities class action lawsuit

The energy company Dakota Plains Holdings, and certain of its officers, were recently served with a securities class action lawsuit alleging a number of false or misleading statements or facts it did not disclose. To learn more about this case, visit Battea’s Dakota Plains case summary.

Specifically, the suit alleges that two executives who co-founded a different energy company actually controlled its business operations, and misappropriated Dakota Plains Holdings’ assets to their own benefit. Moreover, it claims the company did not have effective internal controls in place and that as a result, all statements the company’s and prospects and its executives made within the class period were false and misleading.

The suit has a class period of March 23, 2012, to Aug. 15, 2016.

Dakota Plains Holdings and some of its executives are facing a securities class action.Dakota Plains Holdings and some of its executives are facing a securities class action.

What happened?
Late last October, it was revealed that the U.S. Securities and Exchange Commission charged Ryan Gilbertson, who co-founded Northern Oil (the other company in question), with manipulating Dakota Plains’ stock prices and trying to conceal his actual role with the latter firm as a means of boosting the money he was taking out of it, according to the Minneapolis Star Tribune. Meanwhile, the SEC revealed that the other co-founder, Michael Reger, had agreed to pay a settlement totaling $8 million related to similar charges.

The SEC enforcement action was filed on Halloween in U.S. District Court for Minneapolis, and Gilbertson was accused of manipulating stock as far back as the company’s initial public offering some four years earlier, the report said. Specifically, Gilbertson and Reger led the company to borrow $9 million from them with terms that included bonus payments to them and others, which seem to have artificially inflated the company’s stock price.

The issues the company was suffering caused it to file for bankruptcy within a few months, according to The American Lawyer. The firm had $3.1 million in assets and $75.4 million in liabilities at the time of the December Chapter 11 filing.

How did stock prices move?
Because of the alleged stock price manipulation, Dakota Plains opened in March 2012 at about $11 per share, and that number rose as high as $12 per share within a few days. However, there was a sharp decline in the stock’s price shortly thereafter, as by mid-September the price had declined by half to just $6 per share. It closed that year down even more appreciably at just $3.44.

More or less ever since, the stock has been in a slow steady decline, bottoming out at $1.60 in 2013, $1.19 in 2014, and a little less than $0.25 per share in 2015. It hit less than $0.07 per share at its lowest point last year, but that was before the bankruptcy filing. For most of the new year, the stock was trading at less than a penny per share, but recently climbed closer to 1.5 cents.

For more information on this case or other class action litigations, please contact Sam Wankel, Senior Vice President, Research, Battea Global Litigation Research, Inc., at 203-987-4949 or info@battea.com.