A shareholder class action suit was recently filed to represent organizations and individual investors who bought or otherwise came to own the securities of Conn's, Inc., between Sept. 2, 2014, and Dec. 9, 2014. These dates are inclusive, and represent the class period.
Headquartered in The Woodlands, Texas, Conn's, Inc. is a chain of stores that offer electronics and appliances, as well as related services. The specialty retailer has locations in New Mexico, Texas, Oklahoma, Arizona and Louisiana.
Ryan & Maniskas securities class action
On Dec. 19, 2014, Ryan & Maniskas announced it had filed the securities class action suit in the United States District Court for the Southern District of Texas. The lawsuit brought forth by the law firm alleged the company misled its shareholders by failing to disclose its use of certain business practices. When markets found out, they responded by pushing shares of the specialty retailer lower.
Glancy Binkow lawsuit
Glancy Binkow & Goldberg LLP announced on Dec. 22, 2014, that it had filed a shareholder lawsuit on the behalf of individuals and organizations that bought the securities of Conn's, Inc. during the aforementioned class period.
This legal action, which was also brought forth in the United States District Court for the Southern District of Texas, claimed the defendants failed to disclose key matters to investors, and also provided them with materially false and misleading statements.
Securities class action suit allegations
The Ryan & Maniskas lawsuit alleged that during the class period, the defendants failed to disclose that the company was using collections and underwriting practices that lowered the quality of its portfolio, and made it vulnerable to significant increases in bad debt, and that these practices were helping the specialty retailer grow its financial and business results.
Further, the Glancy Binkow securities class action suit claimed that the company's financial results were put at risk as a result of the practices of the specialty retailer's credit segment, and that Conn's, Inc. failed to disclose this to investors. In addition, the legal action claimed that while the company represented that its delinquencies were rising, they were increasing at a significantly different rate.
Finally, the defendants failed to reveal that because of all the aforementioned, the specialty retailer's statements lacked a reasonable basis, and or were materially false and misleading, at all relevant times.
On Dec. 9, 2014, the company announced its financial results for the fiscal quarter ending Oct. 31, 2014. When it provided these figures, Conn's, Inc. indicated it suffered a net loss during the period, and that higher-than-anticipated losses in its credit segment were a major contributor to this situation. The specialty retailer indicated that provisions for bad debt totaled $72 million during the quarter, a $49.4 million increase from the same time in 2013.
In addition, Conn's, Inc. announced its chief financial officer was leaving, and that the company's board of directors had set up a Credit Risk Compliance Committee. The organization indicated that, pending its current review of oversight initiatives and strategic alternatives, it was rescinding its full-year earnings guidance.
Markets reacted to this news by causing company shares to plunge more than 40 percent to a closing value of $20.83 each Dec. 9, 2014. This decline happened amid abnormally high trading volume.
Options for investors
Both of the lawsuit provided instructions on what options eligible investors have. Ryan & Maniskas indicated that class members could request that the court appoint them as lead plaintiff, but that they had until Feb. 10, 2015, to do so.
Glancy Binkow revealed that if investors meet certain legal requirements, they have the option to move the court before Feb. 10, 2015, in an effort to serve as lead plaintiff in the securities class action suit.