In a Foreclosed Climate the Battering of IndyMac Continues
July 23rd, 2009
There is no end to the problems of IndyMac – in a foreclosed climate its battering continues as its woes slips from bad to worse. The latest source of worry is class-action legal suit taken against this Pasadena based bank.
IndyMac has already been licking its wounds from the sub-prime collapse – increasing foreclosures and tight money flow. The suit was filed in the middle of 2008 by the shareholders of the bank in the District Court of Central California.
The suit alleges that the bank had given misleading information that had caused artificial increase of the stock price of the bank. The suit was filed by Coughlin Stoia Geller Rudman & Robbins LLC representing purchasers of common stock of IndyMac from 16th August to 12th May 2008. The charge was made against the CEO of the bank Michael W. Perry and the chief financial officer of IndyMac A. Scott Keys.
It has been alleged by the plaintiffs that IndyMac gave out “materially false and misleading statements regarding the company’s business and financial results.” The complaint also noted that the exposure of the bank to non-performing assets Pay options for ARM and construction portfolios) were likewise down played and kept concealed. This resulted in the trading of IndyMac stocks at artificially inflated prices during the above mentioned period. It reached a high of $24.55 per share in October 2007.
On the plea that the bank does not discussing ongoing legal suits, IndayMac representatives refused to comment.
Later the shares hit a 52 week low at $1.58 per share in the New York Stock exchange. Previously the stock prices dropped from $33.85 to $1.70.
After all this battering will IndyMac pull through? Jason Arnold of RBC Capital Markets expressed his doubts. He said, “If the economy erodes further from here it will probably get worse for them,” he said. “I wouldn’t rule out receivership. My gut feeling is that they won’t pull themselves out of this unless something changes dramatically over the near term.” Their only hope is the pumping in of funds by some investor.
The suit brought in by the share holders did not surprise Arnold. He explained, “Any time a stock falls beyond 80 to 90 percent of its value these class-action litigators show up. When companies are under duress, whether it’s their own fault or something industry wide, this comes up a lot.”
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