According to the Complaint, CVR Energy, Inc. (“CVI”) is a diversified holding company formed in September 2006 which is primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing industries through its holdings in several limited partnerships, including CVR Refining, LP (“CVRR” or the “Partnership”).
Prior to the start of the Class Period, CVI completed an exchange offer where it exchanged CVI shares for most, but not all, of the outstanding CVRR units (the “Exchange Offer”).
The Class Period begins on July 30, 2018, the trading day following the expiration of the Exchange Offer. On that date, CVRR announced that the General Partner, CVI, and other affiliates now owned 84.5 percent of the outstanding CVRR common units, a sufficient amount to exercise the buyout provision in CVRR’s partnership agreement (the “Call Right”). Under the Call Right, the General Partner had the right to acquire all remaining CVRR units for the greater of: (i) the 20-day trading average three days prior to notice of intent to effect the buyout; or (ii) the highest per-unit price paid by the General Partner and/or affiliates for CVRR units during the 90-day period prior to notice of intent to effect the buyout. Despite the General Partner’s ability to exercise this right, Defendants stated on August 1, 2018, that there were “no current plans to exercise the call right.”
The Complaint allges that throughout the Class Period, Defendants executed a fraudulent scheme to artificially depress the price of publicly traded CVRR units in order to acquire them for a substantial discount: (i) following the Exchange Offer, reduced public float and the threat of the Call Right began depressing the price of CVRR units, more than offsetting favorable financial results; (ii) as the price for CVRR units stagnated, and more than 90 days had passed since expiration of the Exchange Offer, Defendants announced that they were “considering” exercising the Call Right to further drive down the unit price; and (iii) once the price of CVRR units had substantially declined, Defendants exercised the Call Right, which price was based on the (manipulated) 20-day trading average of CVRR units.