CASES
Penson Worldwide, Inc.
Class Period: Feb 10, 2011 to Aug 4, 2011
Lead Plaintiff Deadline: Oct 22, 2011 + Deadline passed
Summary of Case:
A securities class action has been filed against Penson Worldwide, Inc. ("Penson" or the "Company") on behalf of a class of all persons and entities who purchased the common stock of Penson between February 10, 2011 through August 4, 2011. This case has been filed in the USDC - Texas (Northern).
The Complaint alleges that prior to and during the Class Peroid, Penson derived a material part of its revenue and income from interest it received on margin loans to customers. In connection with margin lending to customers, Penson's customers pledge D collateral, such as securities, in return for such loans. Further, Penson represented that the Company maintained adequate policies and procedures to manage and monitor credit risk relating to Penson's margin lending.
During the Class Period, unknown to investors, Penson concealed from investors that by at least the end of 2010, 1) that the Company had approximately $96-97 million in receivables ("Nonaccrual Receivables") of which approximately $43 million were collateralized by illiquid securities and therefore unlikely to be collected; 2) the Company's assets (Nonaccrual Receivables) were materially overstated and should have been written down at least by the end of 2010; 3) as a result, the Company's reported income and EBITDA (earnings before interest, taxes, depreciation, amortization and stock-based compensation, and excluding certain nonoperating expenses) were materially overstated; and 4) the Company's financial statements were not prepared in accordance with generally accepted accounting principles ("GAAP").
Between May 9 and May 11, 2011, Penson shares declined from a close on May 9, 2011 of $5.45 per share to close at $3.93 per share on May 11, 2011, a decline of approximately 28%, on heavy volume. On May 12, 2011, Penson shares declined $0.81 per share further, or approximately 21%, to close at $3.12 per share, on heavy volume. Also on May 12, 2011, J.P. Morgan published a research report that stated, among other things, that that owner of Retama Entertainment Group fully imparied the Series B bonds in 2006 and that Penson did not disclose "other information on collateral backing other portion of $97 million of of nonaccrual receivables." On August 8, 2011, J.P. Morgan issued a report that stated, among other things, "Penson is in a challenging position with inadequate risk management, ongoing operating losses, and a shrinking capital base . . . given very mixed risk management results in the past, we think investors should be particularly concerned . . . we see unorthodox margin loans with questionable collateral as being worrisome, particularly because Penson is highly leveraged."
If you purchased this company's shares during the Class Period and suffered a loss or for further information about the case, please review the links below.