Filed in a Manhattan federal court, the suit names Calabasas, California-based, Countrywide and its majority-owned Effinity Financial unit, according to Reuters. The investors who sued are seeking to revalue the stock options and restore their stake.
Effinity acquired Treasury Bank for $3.2 million in cash, plus 700,000 options to buy Effinity shares. Investors claim that the options gave them an 11% equity stake in Effinity but were instead rendered worthless. To do so, the suit contends that the companies named in the suit undertook a series of moves that rendered the options worthless without informing investors.
The group of plaintiffs includes investors and employees, as well as a law firm pension fund, according to Reuters.
“Effinity and Countrywide did not disclose their intent to dilute and impair the options by issuing to Countrywide … additional Effinity stock while publicly stating that Countrywide was making contributions to capital as required by the Federal Reserve Bank,” the complaint said, according to Reuters.