A number of hedge funds and other shareholders filed a Class Action Lawsuit against General Motors.(MP).A number of hedge funds and other holders of shares in General Motors have filed a class action lawsuit alleging that GM is channel stuffing in order to inflate its sales numbers. This has been long discussed and finally some action. If you think the economy is so robust, what is robust is how much manipulation is going on.
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1. This is a securities class action on behalf of all purchasers of the common stock of GM pursuant in or traceable to the Company's November 18, 2010 initial public offering (the "MO" or the "Offering") pursuant to the Securities Act of 1933 (the "Securities Act").
2. Defendants made materially false and misleading statements, and failed to make subsequent disclosures to make the earlier statements not misleading, related to GM having strong inventory controls in place at the time of the IPO.
3. In connection with the IPO, and in order to assuage concerns that GM was predicting revenue based on production rather than actual sales, GM falsely assured investors that it was actively managing its production by monitoring its dealer inventory levels. Additionally, GM assured investors that in 2011 it would improve inventory management, which would improve average transaction price.
4. These statements were false when made. In July 2011, reports began to surface that GM had engaged in an extraordinary inventory build-up. In particular, an article published by Bloomberg on July 5, 2011 revealed that GM may have been unloading excessive inventory on dealers, a practice known as channel stuffing, in order to create the false impression that GM was recovering and sales and revenues were rising. The Bloomberg article stated that GM's truck inventory swelled to 122 days worth of average sales whereas, by comparison, GM's less profitable car inventory was limited to 60 to 70 days of average sales, Ford was maintaining only a 79 day inventory on comparable trucks, and GM's truck inventory during the years 2002-2010 had similarly averaged only 78 days of average sales. By November 2011, GM dealer inventories were 30% higher than they were on September 30, 2010 (the end of the last full quarter before the November 18, 2010 IPO) and 62% higher than they were at the end of2009.
5. During the three months following the Bloomberg article, GM's share price fell from more than $31.00 to below $20.00, far below the IPO price of $33.00, and continues to trade around $20.00 today.
6. Plaintiff is asserting non-fraud prospectus liability claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 on behalf of purchasers of GM stock in or traceable to the November 18, 2010 IPO.
Hmmmm..........Obama Pushes False GM Success Story: "As part of a credit agreement with Treasury, $16.4 billion in TARP funds were placed in an escrow account that GM could access only with Treasury's permission." As it turns out, GM got Treasury's OK to "repay" more than $6.7 billion "using a portion of the escrow account that had been funded with TARP funds." So GM is merely paying the government back with government money, not money GM is earning selling cars, as the administration has claimed.............."Yes We Can?"Read the full story here.
