According to the law firm press release, the lawsuit claims that Tile Shop failed to disclose that one of its largest suppliers, Beijing Pingxiu (“BP”), is an undisclosed related company secretly controlled by the brother-in-law of the Company’s CEO and a Tile Shop employee. On November 14, 2013, Gotham City Research LLC issued a report asserting that the Company: (a) greatly exaggerated its true financial performance; (b) failed to disclose BP as a material related party supplier; (c) uses BP to overstate inventories, understate cost of sales and overstate gross profits; (d) purchases goods from BP at or near cost to allow Tile Shop to achieve an artificial cost advantage; and (e) overstates earnings. The complaint asserts that when this adverse information entered the market, the price of Tile Shop shares dropped substantially, damaging investors.
On February 13, 2014, the Court issued an Order consolidating cases, appointing Lead Plaintiffs, and approving Lead Counsel.
On March 13, 2014, the Court issued an Order transferring this case to the District of Minnesota. Lead Plaintiffs filed a Consolidated Complaint on May 23.
On January 13, 2017, the parties entered into a Stipulation of Settlement. The Settlement was preliminarily approved by the Court on January 19. The Court granted final approval of the Settlement and dismissed this case on June 14.