According to the law firm press release, Cash Store is a pay-day lender based in Alberta, Canada. The Company primarily operates in Canada, where it maintains 579 branches under the banners "Cash Store Financial" and "Instaloans."
The securities class action charges that, throughout the Class Period, Cash Store made a series of false and misleading statements concerning the Company's financial condition that caused the Company's shares to trade at an artificially high price. Specifically, the complaint alleges that Cash Store made a number of false and misleading statements in its quarterly and annual financial statements in which it overvalued a major loan portfolio it had acquired. Additionally, the Company understated its liabilities associated with a class action settlement.
On December 10, 2012, the Company revealed that it needed to restate its financial statements and that it had inappropriately accounted for the acquisition of a large loan portfolio in violation of U.S. Generally Accepted Accounting Principles ("GAAP"). Specifically, the Company determined that a $36.8 million premium should have been recorded as an expense. The Company further stated that it was going to restate the fair value of the loans acquired to $50 million from which the Company had paid $116.3 million and that its provision for loan losses for the three month periods ending March 31, 2012 and June 30, 2012 was understated by $3.3 million and $3.7 million, respectively. Significantly, the Company admitted that material weaknesses existed as to the Company's internal controls and that such weaknesses led to the restatement.
On February 13, 2013, Cash Store announced that it would again have to restate financial statements because the previous annual and interim financial statements improperly calculated the losses accrued due to a lawsuit settlement. Although every financial statement filed with the SEC estimated liability relating to the lawsuit to be approximately $18 million, in reality the losses were $23.3 million – or approximately 25% higher than previously reported. The Company admitted that its previous financial reports should not be relied upon and that material weaknesses in internal controls for accounting existed during all periods dating back to 2010.
The complaint alleges that, as a result of the foregoing, Cash Store stock plummeted approximately 71.25%, from its Class Period high of $17.10 per share to $3.83 per share at the close of the Class Period, resulting in millions of dollars of losses to class members.
A consolidated complaint was filed on November 18, 2013.
Pursuant to a stipulation of the parties, this case was ordered dismissed with prejudice on December 10, 2015.