HD Supply Holdings, Inc. Securities Class Action
Company: HD Supply Holdings, Inc. (NASDAQ:HDS)
Class Period: November 9, 2016 – June 5, 2017
Lead Plaintiff Deadline: September 11, 2017
Court: Northern District of Georgia, No. 17-cv-02587
WASHINGTON, DC (July 12, 2017) — U.S. Market Advisors Law Group PLLC announces that a class action lawsuit has been filed on behalf of purchasers of HD Supply Holdings, Inc. (“HD Supply” or the “Company(NASDAQ:HDS) securities between November 9, 2016 and June 5, 2017. The lawsuit seeks to recover damages for HD Supply investors under the federal securities laws.
Any member of the putative class may move the Court to serve as lead plaintiff through attorneys of their choice, or may choose to do nothing and remain an absent class member. The lead plaintiff will direct the litigation and participate in important decisions including whether to accept a settlement for the class in the action. The lead plaintiff will be selected from among applicants claiming the largest loss from investment in HD Supply securities during the relevant period. Members of the class will be represented by the lead plaintiff and attorneys chosen by the lead plaintiff.
If you wish to choose attorneys to represent you and the class, you must apply to be appointed lead plaintiff no later than September 11, 2017. If you wish to join the litigation, complete the contact form below to be contacted by an attorney to discuss your rights or interests regarding this class action. There is no obligation or cost to you.
About HD Supply
HD Supply is one of the largest industrial distributors in North America. The Company provides a broad range of products and services to approximately 500,000 professional customers in the maintenance, repair and operations, infrastructure and power and specialty construction sectors.
Complaint Summary Allegations
This action alleges a fraudulent and illegal scheme by HD Supply’s senior executives to artificially inflate the Company’s stock price by issuing false and misleading guidance and hiding critical information from investors. Defendants’ wrongful conduct allowed Defendant Joseph DeAngelo, HD Supply’s President, Chief Executive Officer (“CEO”), and Chairman of the Board of Directors, to unload over 1.3 million shares (representing 80% of his ownership in the Company) for proceeds of over $54 million just weeks before HD Supply’s stock price declined precipitously.
In early 2016, HD Supply’s Facilities Maintenance (“FM”) segment began experiencing a number of supply chain deficiencies. The Company initially failed to properly calculate the demand for its products, leaving it undersupplied in advance of the 2016 spring and summer selling sessions. When management noticed the Company’s product shortfall, it took remedial action to adjust ordering, a decision that led to an unreasonably large buildup of inventory. As a result, HD Supply’s distribution centers were stretched beyond capacity during the latter part of 2016.
In November 2016, Defendants began touting that the Facilities Maintenance recovery was on track and that the Company was “perfectly positioned to enter 2017 and deliver on [its] commitments of 300 basis points more than market, one-and-a-half times operating leverage and 75% cash generation.” Throughout the Class Period, Defendants continued making similar statements, going so far as to assert that HD Supply’s operating leverage would drastically increase in the second half of 2017 due to lower costs in the FM segment.
However, on June 6, 2017, HD Supply reported first quarter 2017 earnings that missed analyst estimates; disclosed the divestiture of one its main business segments, “Waterworks,” which is the nation’s largest distributor of water, sewer, storm and fire protection products; and announced increased capital investments in its FM segment. Given the sizeable increase in FM investment spending, HD Supply was forced to reduce its operating leverage targets for full year 2017—a widely followed metric in the industrial product supply industry. The announced increase in FM investment spending caught analysts and investors by surprise, particularly since the Company had stated on multiple occasions that its inventory setbacks were a thing of the past and that substantial investment in technology and operations had already been made by the Company.
As a result of these disclosures, the Company’s share price declined $7.24 per share, or 17.5%, from a close of $41.27 per share on June 5, 2017 to a close of $34.03 per share on June 6, 2017—wiping out over $1.4 billion in market capitalization in one day. HD Supply’s share price continued trading lower the next day on unusually elevated trading volume, dropping an additional $1.22 per share, or 4%, to $32.81 per share on June 7, 2017—representing a two-day drop of over 20%.