Pomerantz LLP has been appointed Lead Counsel in a class action lawsuit against AgFeed Industries, Inc. (“AgFeed” or the “Company”) (NASDAQ:FEED) and certain of its officers. The class action (3:11-cv-01025) filed in the United States District Court, Middle District of Tennessee, Nashville Division, is on behalf of a class consisting of all persons or entities who purchased AgFeed securities during the period from March 12, 2008 through and including September 29, 2011 (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”).
This class action is brought under Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a); and SEC Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. § 240.10b-5.
The Complaint alleges that throughout the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company's business, operations, and prospects. Specifically, the Company made statements that were materially false and/or misleading because they misrepresented and failed to disclose the following adverse facts, which were known to defendants or recklessly disregarded by them: (1) the Company improperly accounted for certain of its Chinese farm assets acquired during 2007 and 2008 used in its hog production business; (2) certain of the Company’s accounts receivables were invalid and uncollectible; (3) the Company’s allowances for doubtful accounts were undervalued; (4) the Company lacked adequate internal and financial controls; and (5) as a result of the foregoing, the Company issued financial results which were materially false and misleading at all relevant times.
On August 2, 2011, the Company disclosed disappointing preliminary financial results for the second quarter ended June 30, 2011. Moreover, the Company disclosed that it expected to post a loss of more than $17 million as it added $5 million in allowances of its bad-debt provision and needed to take a $9.2 million charge for the collection of outstanding accounts receivable in its animal nutrition business.
As a result of the Company’s disclosures, AgFeed stock plummeted $0.97 or nearly 50% in five consecutive trading sessions, to close at $1.02 on August 8, 2011. On September 29, 2011, after the market closed, the Company disclosed that a special committee will investigate “the accounting relating to certain of the Company’s Chinese farm assets (acquired during 2007 and 2008) used in its hog production business, as well as the validity and collectability of certain of the Company’s accounts receivables relating to its animal nutrition business in China and any other issues that may arise during the course of the investigation.”
As a result of these disclosures, AgFeed stock declined an additional $0.25 or 38% in two consecutive trading sessions, to close at $0.40 on October 3, 2011.