A class action has been commenced on behalf of all persons who acquired KKR Financial Holdings, LLC (“KFN”) (NYSE:KFN) common stock pursuant or traceable to the Company’s false and misleading Registration Statement and Prospectus (collectively, the “Registration Statement”) issued in connection with its May 4, 2007 merger and share issuance (“Merger”).
Specifically, the complaint charges KFN and certain of its officers and directors with violations of the Securities Act of 1933. KFN is a specialty finance company that invests in multiple asset classes. The complaint alleges that the Registration Statement was false and misleading in that it misrepresented and/or omitted material facts, including: (a) the problematic real-estate-related assets held by the Company were a much bigger risk to the Company than the Registration Statement had represented; (b) the Company’s capital would be insufficient given the deterioration in its portfolio which would necessitate capital preservation and the need to raise capital to the detriment of common stockholders; and (c) the Company was failing to adequately record loss reserves for its mortgage-related exposure, causing its balance sheet and financial results to be artificially inflated.
During May, June and most of July 2007, KFN’s stock traded above $25 per share. In late July, many mortgage-related companies’ stock prices declined, including KFN’s. Nevertheless, KFN’s stock closed at $18.02 per share on August 13, 2007. Then, on August 15, 2007, KFN issued a release which revealed that KFN would be selling $5.1 billion in mortgage backed securities at a loss. When this news was revealed, KFN’s stock price collapsed to as low as $9.39 per share, eventually closing at $10.52 per share, a decline from the prior day of 31%. KFN shares currently trade for approximately $10 per share, a 63% decline from the $26.90 per share at which they were sold to plaintiff and the Class.
According to the Order signed by District Court Judge Gerard E. Lynch on January 27, 2009, the City of St. Clair Shores Police and Fire Retirement System is appointed as lead plaintiff and the law firm of Coughlin Stoia Geller Rudman & Robbins LLP is appointed lead counsel. On March 13, 2009, the lead plaintiff filed an Amended Class Action Complaint. The defendants responded by filing a motion to dismiss on April 27, 2009. On November 17, 2010, the Court entered the Opinion and Order signed by Judge Paul A. Crotty granting the defendants’ motion to dismiss the Amended Complaint. Judgment was entered the next day. The case is now closed.