Howard v. Liquidity Services Inc.

Updated: February 17, 2015
Status: Ongoing Case
On October 14, 2014, Labaton Sucharow was appointed co-lead counsel in this securities class action against Liquidity Services, Inc. (Liquidity Services). A consolidated complaint was filed on December 15, 2014.

The complaint alleges that Liquidity Services misrepresented its financial condition between February 1, 2012 and May 7, 2014 (the class period) through materially false and misleading statements related to, among other things, its current and future profitability, the performance of recent acquisitions, and the adverse effects of a decline in business with one of its major clients, the U.S. Department of Defense.

The case is Howard v. Liquidity Services Inc., No. 14-cv-1183 (D.D.C.). Lead plaintiffs are Newport News Employees' Retirement Fund and Caisse de dépôt et placement du Québec. Labaton Sucharow represents Newport News Employees' Retirement Fund. The defendant is Liquidity Services, Inc.

Background
Liquidity Services, Inc. is based in Washington D.C. and operates an online auction marketplace that provides its customers with a platform to buy and sell wholesale, surplus, and salvage goods such as industrial machinery, equipment, materials, vehicles, and inventory.

During the class period, Liquidity touted its current growth and profitability and its future growth prospects, which were based on two growth pillars - "organic" growth through sustained margins and "inorganic" growth through Liquidity's acquisition strategy. However, throughout the class period, Liquidity's margins and revenues were deteriorating and Liquidity was having serious problems integrating its acquisitions. The complaint alleges that as a result of these problems, on a number of occasions Liquidity reported earnings issues, lower projections, and poor results, which drove down the stock price. The company blamed various factors for its disappointing results, including volatility in the economic environment, weak commodity prices, slower than expected roll-outs of new client programs, and the effect high unemployment and increased payroll taxes had on its customers, but failed to disclose the extent of the issues with its two growth pillars in both its capital assets and commercial retail divisions.

Then, at the end of the class period on May 7, 2014, Liquidity Services announced extremely disappointing fiscal Q2 2014 earnings and reduced its forecasts. Liquidity Services' CEO, William P. Angrick, attributed the poor performance and outlook to changes in the Department of Defense business, delayed capital projects in the United States and Europe, and "unusual softness" in the company's energy vertical. On these results and lowered forecasts, Liquidity's stock price dropped 29.69 percent to close at $12.17 per share on May 8, 2014.