Plaintiff Barry Yellen’s suit against the appliance manufacturer, filed in US District Court in Des Moines, Iowa, seeks class-action status to represent all stock purchasers between March 7 and April 21, 2005, according to a Des Moines Register news report. His clients include pension funds, retirement accounts and individual accounts.
In addition to the company, the suit names as defendants Ralph Hake, the company’s chairman and chief executive and George Moore, Maytag’s executive vice president and chief financial officer.
The lawsuit focuses on comments by Hake and Moore on March 7 at the Raymond James Institutional Investors Conference in Orlando, Florida, predicting a rosier financial picture for Maytag in 2005. The company reaffirmed that it expected to earn between $1.10 and $1.30 per share this year in its Raymond James comments.
However, the suit alleges that the defendants knew in February that internal forecasts had been reduced to less than $1 a share and that the company had “missed its 2005 business plan forecast for January by an enormous 78%.” The deception was designed to push up the purchase price of the company, the lawsuit alleges. Maytag disclosed that it was for sale in May after the stock price had dropped.
According to the news report, a Maytag proxy statement prepared for a potential deal with an investment group led by Ripplewood Holdings of New York said the Maytag board and management discussed earnings forecasts of 97 cents to $1.77 on February 10. The lawsuit accuses Maytag of overstating projections to inflate its stock price to get a higher offer from Ripplewood and attract other potential suitors.
Maytag shares later rose, closing at $15.93, up from $14.70 the previous business day, the Register report indicated.
The company publicly changed its business forecast April 22, when it announced first-quarter financial results and lowered its 2005 earnings forecast to a range of 45 to 55 cents a share, the lawsuit says. That produced a precipitous drop in values as shares closed that day at $10.89, down from $15.10 the previous day.
According to the Register report, in a statement accompanying the lawsuit, Yellen said he purchased 20,000 Maytag shares during the March to April period on behalf of various clients, paying between $15.51 and $15.68 per share.