Press release from Business Wire
Robbins Geller Rudman & Dowd LLP Files Class Action Suit against Tile Shop Holdings, Inc.
Thursday, November 21, 2013
Robbins Geller Rudman & Dowd LLP Files Class Action Suit against Tile Shop Holdings, Inc.16:18 EST Thursday, November 21, 2013
NEW YORK (Business Wire) -- Robbins Geller Rudman & Dowd LLP (“Robbins Geller”) (http://www.rgrdlaw.com/cases/tileshop/) today announced that a class action has been commenced in the United States District Court for the Southern District of New York on behalf of purchasers of Tile Shop Holdings, Inc. (“Tile Shop”) (NASDAQ:TTS) common stock during the period between August 22, 2012 and November 13, 2013 (the “Class Period”).
If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from November 15, 2013. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff's counsel, Samuel H. Rudman or David A. Rosenfeld of Robbins Geller at 800/449-4900 or 619/231-1058, or via e-mail at firstname.lastname@example.org. If you are a member of this class, you can view a copy of the complaint as filed or join this class action online at http://www.rgrdlaw.com/cases/tileshop/. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.
The complaint charges Tile Shop and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Tile Shop is a specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories in the United States.
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company's financial performance and future prospects and failed to disclose adverse facts, including that Tile Shop had been acquiring the vast majority of its product from China, paying below-market prices for product that contained dangerously high lead levels, and that Tile Shop had acquired 8.3% of its product sold in fiscal 2011, 16.3% of its product sold in fiscal 2012, and 32.2% of its product sold in fiscal 2013 from a Chinese supplier that was owned and operated by the brother-in law of Tile Shop's Chief Executive Officer (“CEO”). The complaint also alleges that defendants concealed that Tile Shop had been using captive, phantom suppliers to overstate inventories, understate cost of sales and overstate gross profits in its Class Period financial reports. Due to these false statements and omissions, Tile Shop was able to complete secondary public stock offerings on December 12, 2012 and June 5, 2013 at artificially inflated prices.
On October 30, 2013, Tile Shop issued a press release announcing its 2013 third quarter results (for the period ended September 30, 2013). Rather than the $0.10 per share earnings defendants had led the market to expect, Tile Shop reported just $0.08 per share in earnings. And during the conference call held with investors that evening, defendants stated that the Company was increasing its fiscal 2013 revenue guidance from $222 million to between $227 and $237 million, without simultaneously increasing the Adjusted EBITDA guidance, demonstrating, according to the complaint, that the Company's profit margins were falling.
Finally, on November 14, 2013, research and investment firm Gotham City Research (“Gotham”) published a report disclosing that, unbeknownst to investors, Tile Shop had acquired material amounts of its product sold in fiscal 2011, 2012 and 2013 from a Chinese supplier that was owned and operated by the brother-in-law of the Company's CEO. Gotham claimed that Tile Shop inflated its earnings by 200% during fiscal 2013 alone by using its China-based controlled “phantom” suppliers to beef up its numbers.
On this news, shares of Tile Shop fell 39%, or $8.27 per share, to close at $12.95 per share on November 14, 2013, on usually high trading volume of more than 19.5 million shares traded, which tripped the NASDAQ's short sale circuit breaker. In the end, on these disclosures, the price of Tile Shop stock had declined nearly $18 per share from its Class Period high.
Plaintiff seeks to recover damages on behalf of all purchasers of Tile Shop common stock during the Class Period (the “Class”). The plaintiff is represented by Robbins Geller, which has expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud.
Robbins Geller represents U.S. and international institutional investors in contingency-based securities and corporate litigation. With nearly 200 lawyers in ten offices, the firm represents hundreds of public and multi-employer pension funds with combined assets under management in excess of $2 trillion. The firm has obtained many of the largest recoveries and has been ranked number one in the number of shareholder class action recoveries in MSCI's Top SCAS 50 every year since 2003. Please visit http://www.rgrdlaw.com for more information.
Robbins Geller Rudman & Dowd LLP
Samuel H. Rudman, 800-449-4900
David A. Rosenfeld