Lexmark is facing another lawsuit from Khang & Khang LLP, a California-based law firm specializing in bankruptcy, litigation and business transactions cases. The law firm has filed a class action security claim on behalf of plaintiffs that purchased shares in Lexmark in the class period between August 1, 2014 and July 20, 2015.
This is the second law firm to announce a lawsuit against the printer manufacturer, the other being Labatron Sucharow LLP on behalf of Oklahoma firefighters pension and retirement scheme who announced their lawsuit on July 20, 2017.
Both lawsuits allege that during the class period, Lexmark made materially false and misleading statements by failing to disclose that (1) end-user demand and growth for the Company’s supplies business was deteriorating; (2) pricing increases were the primary driver of supplies revenue growth, not end-user demand; (3) customers in the supplies channel reacted by Case 1:17-cv-05543-WHP Document 1 Filed 07/20/17 Page 10 of 23 10 buying ahead of anticipated pricing increases; and as a result, (4) there was excessive inventory levels at it European wholesale distributors.
During the class period, Lexmark repeatedly reported business growth. On April 28, 2015, Lexmark official Reeder, who resigned for personal reasons in June, stated: “strong end-user demand was the primary driver of year-to-year growth, but we estimate that the Laser supplies channel inventory increased slightly.”
However, on July 21, 2015, Lexmark revealed poor results for its second quarter ending June 30, 2015 and lowered its 2015 sales guidance. The company admitted its supplies growth was resulted from European customers buying ahead leading to excessive inventory–not end-user demand.
As a result, Lexmark’s stock price dropped $9.57 per share, or 20.2 percent, to close at $37.75 per share on July 21, 2015, wiping out approximately $550 million in market capitalization. The complaint has issued that the plaintiff has suffered significant losses and damages due to the Defendants wrongful acts.