The draft of the pending class action suit against Cavco Industries (CVCO) is the result of a news tip to the Daily Business News on MHProNews.
As regular MHProNews readers know, there are numerous law firms circling Cavco. This report will review some key claims of the Howard G. Smith lawfirm’s attorneys, acting on behalf of CVCO shareholders in the pending suit.
Quoting from the attached draft, this report will start with – the Nature and Overview of the Plaintiffs Pending Complaint?
- This is a class action on behalf of persons and entities that acquired Cavco securities between August 6, 2018 and November 8, 2018, inclusive (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”).
- On November 8, 2018, the Company revealed that it had received a subpoena from the SEC’s Division of Enforcement on August 20, 2018, requesting certain documents relating to trading in the stock of a public company, and that then-Chief Executive Officer Joseph Stegmayer had received a subpoena regarding similar issues on October 1, 2018.
- On this news, the Company’s share price fell $49.48 or over 23%, to close at $165.20 per share on November 9, 2018, on unusually heavy trading volume.
- Throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that the Company had agreed to refrain from trading the stock of public companies; (2) that, after such agreement, the Company’s CEO had engaged in the trading of the stock of public companies; (3) that such trading activities were reasonably likely to subject the Company to regulatory investigations; and (4) that, as a result of the foregoing, Defendants’ positive statements about 2 the Company’s business, operations, and prospects were materially false and/or misleading and/or lacked a reasonable basis.
- As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages.
CLASS ACTION ALLEGATIONS
“(1) that the Company [Cavco] had [previously] agreed to refrain from trading the stock of public companies;
(2) that, after such agreement, the Company’s CEO [Joe Stegmayer] had engaged in the trading of the stock of public companies;
(3) that such trading activities were reasonably likely to subject the Company to regulatory investigations; and
(4) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially false and/or misleading and/or lacked a reasonable basis.
- Throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors:
- As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages.”
Specific and Broader Take-Aways?
There are some voices in the industry’s legal community that indicate that the phrasing used above could potentially be used against some other publicly traded companies, specifically those associated with the Manufactured Housing Institute (MHI). If so, that in turn could mean MHI members who ignore the risks associated with the reports like the one linked here could be putting their shareholders at risk too.
Keep in mind that a contact at the Securities and Exchange Commissions (SEC) would neither confirm nor deny that Cavco is being investigated for possible market-rigging collusion in connection with Clayton Homes, a Berkshire Hathaway (BRK) subsidiary. Stegmayer was prior to going to Cavco, a Clayton division president. There have been persistent rumors among some HUD Code manufactured home independents and others that the move by Stegmayer to Cavco was part of a plan hatched at Clayton. But there is no documentation that has yet to be provided to MHProNews that supports such a claim. Why is that of interest?
Consider the second point from the plaintiff’s draft foundation.
“Cavco purports to design and produce factory-built homes and to build park model RVs, vacation cabins and systems-built commercial structures.” Purports? Isn’t that the obvious thing that they are doing? Is the Howard G. Smith law-firm signaling that they have something more?
It should be noted that the Manufactured Housing Institute (MHI) has been characteristically mute on this developing issue. Stegmayer remains in place as the MHI Chairman.
Note too that some bloggers in the industry have attempted to white-wash the seriousness of this matter. There are those who believe that those cheerleading bloggers and ‘trade media’ are acting as a deliberate distraction mechanism from MHI and their puppet masters.
A contact at Cavco declined commenting about the specifics of the matter, saying to publisher L.A. ‘Tony’ Kovach “No comment sorry…I appreciate the offer (to share a Cavco viewpoint). You are an honest man no matter what George [Allen] says…” It was an interesting comment, as doubtless many at the firm have been harmed, specifically if employees are also shareholders. It should be noted anew, given cheap shots from the galleries, that MHProNews follows the known facts, evidence, and the money.
The full draft legal document against Cavco is attached here.
There is speculation from a source that the draft was provided to MHProNews perhaps as a negotiation tool with Cavco, to use as leverage to quietly settle the case. MHProNews is not in a position to comment on the motivations, or lack thereof, of those who provide authentic news tips backed by evidence.
There’s more on this evolving Cavco Industries (CVCO) and inter-related topic that MHProNews has obtained. In the days ahead, related reports will be published, possibly during the Louisville Show. Watch for it and sign up for the industry’s leading emailed headline news, found at the links below.
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