NEW YORK--(BUSINESS WIRE)--
The law firm of Wohl & Fruchter LLP has filed a class action lawsuit against LinnCo, LLC (LinnCo) (LNCO), certain of LinnCo’s officers and directors, and the underwriters involved in LinnCo’s initial public offering (IPO) on October 12, 2012. The class action was filed in the United States District Court, Southern District of New York (13-cv-4790) on behalf of investors who purchased LNCO shares in or traceable to LinnCo’s IPO on October 12, 2012, through July 1, 2013, both dates inclusive (the “Class Period”), and seeks damages pursuant to Sections 11 and 15 of the Securities Act of 1933 for defendants’ false and misleading statements in the Registration Statement and Prospectus filed with the SEC for the IPO.
If you are a shareholder who purchased LNCO shares during the Class Period and wish to serve as a lead plaintiff, you have until September 9, 2013 to seek appointment by the Court as lead plaintiff for the class. To discuss the case or learn more about becoming a lead plaintiff, please contact J. Elazar Fruchter at firstname.lastname@example.org, or call us toll free at 866.582.8140. A copy of the complaint filed by Wohl & Fruchter can be obtained at: http://www.wohlfruchter.com/cases/lnco.
As alleged in the complaint, LinnCo is a Delaware limited liability company whose sole purpose is to own units representing limited liability company interests (“units”) in Linn Energy, LLC (“Linn”), an independent natural gas exploration and production company whose units trade on NASDAQ under the symbol “LINE.”
On October 12, 2012, LinnCo filed its Prospectus for the IPO. Including the underwriters’ exercise of their over-allotment option, 34,787,500 shares of LinnCo were sold pursuant to the IPO at a price of $36.50 per share, raising approximately $1.2 billion in net proceeds for the Company after underwriting discounts, commissions, and fees. LinnCo used the net proceeds from the IPO to acquire units in Linn equal to the number of shares sold in the IPO.
As set forth in the Registration Statement, LinnCo has no significant operations or assets other than its ownership of units in Linn, and its cash flow consists exclusively of distributions from Linn. Accordingly, LinnCo’s ability to pay dividends to its shareholders is entirely dependent upon the ability of Linn to successfully generate cash flow from its business to make distributions to its unitholders, including LinnCo.
As alleged in the complaint, defendants made false and misleading statements in the Registration Statement with respect to, among other things, Linn’s ability to sustain or increase distributions to LinnCo and other unitholders, and thereby misled investors about the risk of their investment in LinnCo. Specifically, the complaint alleges that certain non-GAAP metrics highlighted in the Registration Statement (i.e., Adjusted EBITDA, Distribution Coverage Ratio, and Distributable Cash Flow) as purportedly reliable measures of Linn’s ability to make distributions were misleading because they did not, among other issues, reflect the cost to Linn of certain settled put options.
In two articles published in February 2013 and in May 2013, Barron’s criticized Linn’s accounting for its derivative contracts pursuant to which Linn excluded the cost of settled put options from Adjusted EBITDA and Distributable Cash Flow, even while including the realized gains from such options in those metrics. Barron’s argued that this accounting practice enabled Linn to mask weakness in its distributable cash flows, thereby calling into question the sustainability of Linn’s distribution rate.
Following the May 2013 Barron’s article, LNCO shares dropped nearly 8% to close at $39.24 per share on May 6, 2013.
On July 1, 2013, Linn and LinnCo disclosed that the SEC had opened an informal inquiry into LNCO’s proposed merger with Berry, and Linn’s and LinnCo’s hedging strategies and use of non-GAAP financial measures (the same accounting issues for which Linn and LNCO had been criticized by Barron’s).
On this news, LNCO shares dropped $10.12 per share, or 27.3%, over two trading sessions, to close at $26.95 per share on July 3, 2013.
The class action filed by Wohl & Fruchter seeks damages for investors who purchased LNCO shares during the Class Period on the grounds that LNCO’s share price was artificially inflated as a result of the defendants’ false and misleading statements in the Registration Statement.
Wohl & Fruchter LLP is an experienced securities litigation firm representing plaintiffs in class actions arising from fraud and other fiduciary breaches by corporate managers, as well as other complex litigation matters. Please visit our website, www.wohlfruchter.com, to learn more about our Firm, or contact one of our partners.
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J. Elazar Fruchter
845-425-4658 or Toll Free 866-582-8140