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FCStone Group, Inc. Summary: According to a law firm press release, a class action was filed alleging violations of the federal securities laws on behalf of purchasers of FCStone Group, Inc. The defendants include the Company and members of senior management. The suit is pending in the United States District Court for the Western District of Missouri.
As set forth in the Complaint the Company entered into an important hedge transaction (the "Hedge") which, for the first two quarters of fiscal 2008, generated net income to the Company of approximately $5 million. Most of this income was generated in the second quarter ended February 29, 2008. In a conference call on April 10, 2008, the Company concealed the true nature of the Hedge, by failing to reveal that should there develop a significant spread between the U.S.-based Fed Funds interest rate (the "Feds Funds Rate") and the London Inter-Bank Rate ("LIBOR"), the Hedge would decline in notional value. Based on what the market was told, the investing public viewed the hedge as simply one to protect the Company from falling interest rates, and not one which was crucially dependent upon the spread between the Fed Funds Rate and LIBOR not widening. However, in the third quarter of 2008 a significant spread arose between the Fed Funds Rate and LIBOR. As a result, the Hedge was declining so swiftly in notional value that the Company sold the Hedge, which sale wiped out any Hedge based gains for the first two quarters of fiscal 2008. On July 10, 2008, FCStone shocked the market by announcing third quarter earnings per share of 28 cents versus the expected 47 cents. Much of the deviation was due to the decline and sale of the Hedge. In addition, the Company announced previously unmentioned and significant bad debt expenses due to volatility in the cotton markets which had occurred in March. Nothing was said about this volatility and its adverse effects on the April 10, 2008 conference call. Upon revelation of this adverse news FCStone shares dropped over 41% wiping out over $300 million in shareholder value.
INDUSTRY CLASSIFICATION:
SIC Code: 6221
Sector: Financial
Industry: Investment Services
| COMPANY/ISSUER NAME: | FCStone Group, Inc. |
| COMPANY/ISSUER TICKER: | FCSX |
| COMPANY WEBSITE: | http://www.fcstone.com |
| FIRST IDENTIFIED COMPLAINT IN THE DATABASE | |||||||||||||||||
| Paul Luman, et al. v. Paul G. Anderson, et al. | |||||||||||||||||
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| DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT | |||
| Class Action Complaint | |||
| Type: Complaint | Date on the document: 7/16/2008 | ||
| U.S. District Court Civil Docket | |||
| Type: Docket | Date on the document: 7/16/2008 | ||
| OTHER DOCUMENTS | |||
| Case Name and/or Number: | |||
| Type: | Date on the document: | ||
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