Faruqi & Faruqi, LLP Files Class Action Lawsuit Against LinnCo, LLC (LNCO)
Notice is hereby given that Faruqi & Faruqi, LLP has filed a class action lawsuit in the United States District Court for the Southern District of Texas, Case No. 4:13-cv-02521-VDG, expanding the class definition to include all those investors who purchased or otherwise acquired LinnCo, LLC (“LNCO” or the “Company”) securities and/or sold LNCO put option contracts between October 12, 2012 and July 1, 2013, inclusive (the “Class Period”) and suffered damages as a result.
LNCO is a Delaware limited liability company whose sole purpose is to own units representing limited liability company interests (“units”) in Linn Energy, LLC (“Linn”). Linn is an independent natural gas exploration and production company whose units trade on NASDAQ under the symbol “LINE.”
LNCO, certain of its officers and/or directors, and underwriters are charged with violations of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Complaint alleges that throughout the Class Period, defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about LNCO’s business and financial condition. Specifically, the complaint alleges that defendants made false and/or misleading statements and/or failed to disclose to LNCO investors that: (1) Linn was overstating the cash flow available for distribution to Linn unitholders such as LNCO by, among other things, excluding the cost of certain hedging transactions from its calculation of adjusted EBITDA, and understating maintenance capital expenditures; and (2) as a result of the foregoing, LNCO’s financial statements were materially false and misleading at all relevant times.
In February and May 2013, Barron’s questioned Linn’s aggressive accounting practices. Among other things, Barron’s criticized Linn for using non-GAAP accounting to mask considerable weakness in its distributable cash flows, thus calling into question the sustainability of its dividend. Further, Barron’s questioned Linn’s accounting for its derivative contracts by, for example, excluding the cost of its put contract derivatives from its cash flow, while including the gains. As a result of these issues, in its May 2013 article, Barron’s labeled Linn “the country’s most overpriced large energy producer.” Following the May 2013 Barron’s article, Linn units declined 7%, to close at $35.75 per unit on May 6, 2013. In turn, LNCO shares dropped nearly 8% to close at $39.24 per share on May 6, 2013.
On July 1, 2013, Linn and LNCO disclosed that the SEC had opened an informal inquiry into Linn and LNCO’s hedging strategies and use of non-GAAP financial measures (the same accounting issues for which Linn and LNCO had been criticized by Barron’s). On this news, Linn units declined $10.50 per unit, or 31.5%, within two trading sessions, to close at $22.79 per unit on July 3, 2013. In turn, LNCO shares dropped $10.12 per share, or 27.3%, within two trading sessions, to close at $26.95 per share on July 3, 2013.
Plaintiff now seeks to recover damages on behalf of himself and all other individual and institutional investors who purchased or otherwise acquired LNCO securities and/or sold LNCO put option contracts between October 12, 2012 and July 1, 2013, excluding defendants and their affiliates, and were damaged thereby. Plaintiff is represented by Faruqi & Faruqi, LLP, a law firm with extensive experience in prosecuting class actions and actions involving corporate fraud.
If you sold LNCO put option contracts and/or purchased or otherwise acquired LNCO securities during the Class Period and were damaged thereby, you may, not later than September 9, 2013, move the court to serve as lead plaintiff of the class, if you so choose. In order to discuss this action, or if you have any questions concerning this notice or your rights or interests, please contact:
FARUQI & FARUQI, LLP
369 Lexington Avenue, 10th Floor
New York, NY 10017
Attn: Richard Gonnello, Esq.
Francis McConville, Esq.
Telephone: (877) 247-4292 or (212) 983-9330
Richard W. Gonnello
Faruqi & Faruqi, LLP
685 Third Avenue 26th Floor
New York, NY 10017
Tel: (212) 983-9330
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