Blog: Tyson Foods investors left to chew over analyst claims

Dean Best | 10 October 2016

Shares in Tyson Foods slumped on Friday, closing down almost 9% after an analyst claimed a lawsuit facing the company could hit the US meat titan.

Tyson Foods was among more than a dozen poultry processors to be named in a suit filed last month by New York-based distributor Maplevale Farms, which claimed the businesses "conspired and combined to fix, raise, maintain, and stabilise the price of broilers" from as early as January 2008.

A second, class-action suit then emerged echoing the allegations.

Contacted by just-food last month, Tyson said: "We dispute the claims made in these complaints and will defend ourselves in court."

Tim Ramey, an analyst at Pivotal Research Group, issued a note to clients last week in which he insisted he was not alleging Tyson had colluded on pricing or production - but did say the suit was "powerfully convincing".

"Our thesis is that the class-action suit has merit and will lead to intense scrutiny of the broiler sector," Ramey wrote, according to Reuters. "We have long wondered how an industry marked by such volatility and lack of discipline could morph to a highly disciplined industry where production remains constrained and pricing remains high."

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.

The ball, clearly, is in the hands of the US courts. One would imagine Ramey was confident enough in his assertions to have published the note but, equally, Tyson must be sure in its position to have responded swiftly. One to watch.