On June 7, 2016, Judge Gregory H. Woods of the U.S. District Court for the Southern District of New York entered an order appointing the Plumbers & Pipefitters National Pension Fund as lead plaintiff and Cohen Milstein as lead counsel in the securities class action lawsuit against Performance Sports Group Ltd. (“PSG” or the “Company”) (NYSE: PSG).
PSG, together with its subsidiaries, designs, manufactures, and distributes sports equipment, apparel, and accessories for hockey, lacrosse, baseball, softball, and soccer for sporting goods markets in the United States, Canada, Europe, Japan, and Russia. The Company operates under brands named Bauer, Mission, Maverik, Cascade, Inaria, Combat, and Easton. The class action suit is on behalf of purchasers of PSG securities between January 15, 2015 through and including March 14, 2016 (the “Class Period”).
The complaint charges PSG, and several of its officers and directors, with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 thereunder. Specifically, the complaint alleges that defendants issued false and misleading statements, failing to disclose that 1) The Sports Authority Inc.’s financial problems would impact PSG’s financial performance; 2) the baseball and softball markets were in decline; 3) the consolidation of PSG’s U.S. hockey customers would create a smaller demand for hockey equipment; and 4) as a result, defendants’ statements about PSG’s business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis.
The complaint alleges that following each fiscal quarter, beginning as early as the second quarter 2015, PSG was aware of, but did not disclose, adverse facts concerning its financial condition including, among others, the impact of Sports Authority’s financial problems, the effects of U.S. hockey retail consolidation among PSG’s primary customers, and the slowdown in the baseball/softball markets. According to the complaint, PSG issued a press release on January 13, 2016, announcing its financial results for Q1 2016 and lowering its previously issued guidance for the fiscal year ending May 31, 2016 from $0.70 to $0.73 per share to $0.66 to $0.69 per share.
Before the market opened on March 8, 2016, the Company issued a press release revising guidance for the same fiscal year by about $0.55 per share down to about $0.12 to $0.14 per share. According to the complaint, this news caused the Company’s share price to fall $5.75 per share or over 66% to close at $2.91 per share on March 8, 2016. After the market closed on March 14, 2016, an article from The New York Post entitled “Bauer’s parent company questioned about misdating earnings,” was published causing shares of PSG to fall $0.41 per share or over 10.35%. The PSG stock closed at $3.55 per share on March 15, thereby damaging investors.