Law firm Gainey McKenna & Egleston has launched a class action lawsuit on behalf of Tyson Foods investors alleging that the company concealed collusion with other leading US poultry processors to fix chicken prices.
Gainey McKenna & Egleston filed the suit against Tyson this week in the United States District Court for the Southern District of New York on behalf of “all persons who purchased or otherwise acquired securities of Tyson” between 23 November 2015 and 6 October 2016.
“The… defendants concealed from the investing public that: (i) since 2008, Tyson Foods has colluded with the country’s leading poultry producers to manipulate the supply of broiler chickens in order to keep the price of broiler chickens artificially high; (ii) from 2013-2016, Tyson Foods exported hatching eggs to Mexico and other foreign countries to artificially reduce the supply of broiler chickens in the US and to increase the price of broiler chickens in the US; (iii) in turn, Tyson Foods lacked effective internal control over financial reporting; and (iv) as a result, Tyson Foods’ public statements were materially false and misleading at all relevant times. As a result of defendants’ alleged false and misleading statements, the company’s stock traded at artificially inflated prices during the class period,” the complaint alleges.
The suit, filed at a US District Court in Illinois by New York-based distributor Maplevale Farms, claims the 14 businesses, which also include Perdue Farms,Foster Farms and Mountaire Farms, “conspired and combined to fix, raise, maintain, and stabilise the price of broilers” from as early as January 2008.
Tyson has dismissed the accusations. At the time they emerged, a spokesperson for Tyson told just-food: “We dispute the claims made in these complaints and will defend ourselves in court.”
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Earlier this month, analysts at Pivotal Research issued a report downgrading Tyson Foods to “sell” from “buy” and slashing its price target from US$100 to $40.
Analysts at Pivotal noted the federal antitrust lawsuit is a “powerfully convincing class-action” and that if the allegations therein are true, it “explains why Tyson can offer EPS guidance with remarkable precision; boasting of margins at record levels well into the future. The Tyson of old did not provide guidance. We believe the consistent setting and meeting of earnings targets has been a major factor in the positive re-rating of the shares.”
The note – and subsequent tumble in Tyson’s share price – prompted the company to make the unusual move of issuing a statement.
“An analyst report has been issued this morning commenting on pending antitrust litigation which was filed over a month ago. While we don’t normally make substantive comments regarding pending litigation, we dispute the allegations in the complaints as well as the speculative conclusions reached by the analyst, and we will defend ourselves in court. Contrary to what the analyst assumed, we have not made any changes to our business practices in response to the complaints,” Tyson said.
After Pivotal Research issued its note, shares in Tyson dropped over 8%, closing at $67.75 per share the day the note was issued (7 October). Tyson shares are currently trading at $69.38.