Shares of auto parts maker Martinrea International Inc. fell sharply Monday for the second successive trading session on the Toronto Stock Exchange amid new allegations in a lawsuit against senior company executives and a reduction by an analyst of his target price for the stock.
The Toronto-based auto parts company, some of its senior executives, some directors and its former chief executive officer is facing a lawsuit launched earlier this year that accused them of breaching their fiduciary duties and engaging in corrupt practices.
The latest allegations were filed in the Ontario Superior Court of Justice last week in a reply to statements of defence and counterclaim by the Martinrea defendants.
The company’s shares fell 9 per cent in mid-day trading on Monday, following a selloff of 13 per cent on Friday.
Industry analyst David Tyerman, who follows the company for CanaccordGenuity, cut his target price for the stock to $10.25 from $12.25, citing the risk that managment’s time will continue to be distracted by the lawsuit.
Among the new allegations are that the company has booked fictitious profits from one of its overseas plants, that between $50-million and $100-million has been funnelled out of Martinrea via kickbacks and misappropriation and that Martinrea has poor relationships with some of its auto maker customers.
The allegations have not been proved or examined in court.
Martinrea said in a statement issued Friday that the new documents do not change its position that the concerns raised by former vice-chairman Nat Rea were raised more than two years and he appeared satisfied at the time with how they were addressed.
A reply to the statement of defence to the company’s counterclaim against Mr. Rea is scheduled to be filed this week, the Martinrea statement said.
A special committee of Martinrea’s board of directors is examining the litigation and the issues raised and is being assisted by lawyers and accounting consultants from outside the company, the statement added.