Securities Sleuth

Accredited Home Lenders (NASDAQ: LEND is a Big LOSS

Yesterday’s meltdown in the securities market was devastating to some investors, particularly those who invested in subprime lenders.  The worst example was Accredited Home Lenders Holding Co. (NASDAQ: LEND).

Perhaps the sector was due for a correction.  But the magnitude of LEND’s stock drop was exacerbated due its complete lack of adequate disclosure by the Company.  If the Company had been more forthcoming at an earlier stage about it true financial condition, then its stock wouldn’t have dropped over 65% in one trading session.  More importantly many investors probably wouldn’t have purchased the stock at all.

Let’s consider what the Company disclosed yesterday before the opening of the market.  First, the Company admitted that its cash resources have been affected primarily by margin calls since January 1, 2007 from the Company’s lenders and because of ongoing loan repurchases (which had not been previously disclosed).  Second, the Company disclosed that it is seeking waivers of certain covenants under its loan agreements, including waivers relating to required levels of net income. The Company has been operating under various waivers under these facilities since December 31, 2006

(which had not been previously disclosed).  Finally, the Company disclosed that it is unlikely that the Company will file its Annual Report on Form 10-K on time.

Investors and the market rely upon adequate disclosure which is mandated by our Federal securities laws.  The fact that Accredited Home Lenders did not disclose key facts earlier is very troubling. 

We are investigating this case and if you are an affected investor you may wish to contact us to discuss your options.

Sonic Solutions (NASDAQ: SNIC) Will Restate

The ongoing backdated options scandal continues to haunt investors in certain companies, in particular those companies that need to result their financials as a result of improper backdating.  The latest example is Sonic Solutions (NASDAQ: SNIC).  On February 1, 2007 the Company disclosed that it was investigating its stock option granting practices.  Not surprisingly, the stock dropped in heavier than usual volume.  But yesterday, after the close of trading the Company stated that it will restate its financial statements for certain, as yet not determined periods. As you would suspect, Sonic Solutions stock dropped today again on heavier than normal volume.

We are investigating this matter and affected shareholders may wish to contact us.

New Century Financial (NEW) To Restate

Not all REITs are performing well, but almost all have been reporting their financials accurately.  This, however, isn’t the case with Irvine, CA-based New Century Financial Corp. (NYSE: NEW).  Its investors were stunned to learn February after the close of trading that it will restate its financial results for the quarters ended March 31, June 30 and September 30, 2006to correct errors the company discovered in its application of generally accepted principles regarding the company’s allowance for loan repurchase losses. Not surprisingly, its stock plummeted on this news.  

It appears that investors who purchased between April 7, 2006 and February 7, 2007, are affected and we are investigating options for affected investors.

Insider Sales by Nutrisystem (NTRI) Before Drop

Last October Nutrisystem (NTRI) represented that it was “in a high-growth mode” and had a “proven ability to identify and penetrate new market segments.”  But while the Company was representing it had a great future, its insiders were selling – they weren’t buying. 

Specifically, in the last 6 months insiders sold approximately 317,000 shares and did not buy any stock.  In November and December 2006, there were numerous insider sales, including the CEO and the CFO.  So, when on January 30, 2007, Nutrisystem disclosed its projected earnings for the first quarter of 2007 were well below the expectations of many analysts, it isn’t surprising that it stock plummeted.  Specifically, its stock declined from $57.84 at the close on January 29, 2007 to a close on January 31, 2007 of $44.05 – a drop of 24%.  We are investigating and it appears that investors who purchased between October 24, 2006 and January 29, 2007, are affected. 

Backdated Options Haunt Electronics for Imaging, Inc. (EFII) Investors

For yet another company the backdated options scandal doesn’t appear to be going away and has been negatively affected shareholder value. California-based Electronics for Imaging, Inc. (EFII) manufactures digital controllers, formal printers and inks, and commercial print management solutions worldwide. On January 30, 2007after the close of trading, the Company disclosed that it would delay the filing of its annual report for the year ended December 31, 2006 as a result of an investigation of possible improper stock option backdating.  The Company has not yet filed its quarterly report for the quarter ended October 31, 2006because of the investigation.

Thus far today EFII shares have declined approximately $2.16 per share or approximately 9% on heavier than usual volume. We are investigating this matter and It appears that investors who purchased EFII between January 31. 2006 and January 30, 2007, are affected. 

 

Thor Industries (THO) May Restate

No one likes to hear that a company in their portfolio may restate and that’s why the market has reacted negatively to Thor Industries, Inc. (THO).  The Company engages in the manufacture and sale of recreation vehicles, and small and mid-size buses in the United Statesand Canada. 

At the end of the trading day on January 29, 2007, the Company announced that it may need to restate its financial statements going back to 2004.  Specifically, the Company disclosed that both its audit committee and independent outside advisers are investigating a subsidiary’s inventory, accounts payable and cost of goods sold. Not surprisingly, the market has reacted very negatively to these disclosures. We are investigating this matter and it appears that investors who purchased THO between December 1, 2003 and January 29, 2007, are affected.

Tough weeks for Coast Financial Holdings (CFHI) Shareholders

The last two weeks have been very tough for Coast Financial Holdings, Inc. (CFHI) shareholders.  The Company operates as the holding company for Coast Bank of Florida that provides various consumer and commercial banking services to individuals and small to medium sized businesses in Manatee, Pinellas, and Sarasota counties in Florida.

The bad news started on January 19, 2007, after the close of the market, when the Company disclosed in an SEC filing that it had made $110 million in loans to 482 borrowers whose homes were being built by a single developer that had “ceased construction activities” and is experiencing “financial difficulty”.  The amount of the loans involved probably represent about 20% of the bank’s loan portfolio and the Company indicated that these circumstances are “reasonably likely to have a material adverse impact” on the bank’s loan portfolio” and the bank’s audit committee would be conducting a review.  This announcement resulted in a drop of approximately 25% the next trading day on heavier than usual volume. 

More bad news would follow. On January 22, 2007, CFHI shares declined an additional 28%, after the bank disclosed additional details about its loan program.  Finally, on January 24, 2007, the bank’s stock dropped another 14% after it announced the Board of Directors had engaged Sandler O'Neill & Partners, L.P. to advise on the financial aspects of the Company's review of its strategic options. We are currently investigating.

LECG Corporation (XPRT) May Need Their Own Expert

LECG Corporation (XPRT) and its wholly owned subsidiary, LECG, LLC provides expert services, including economic and financial analysis, expert testimony, litigation support, and strategic management consulting to a range of public and private enterprises.  Perhaps, after their January  25, 2007announcement regarding their preliminary estimates of Fourth Quarter and Full Year 2006 results the Company may need to use some of their financial expertise internally.  Specifically, the Company indicated that it would miss its previously reported guidance for the fourth quarter by approximately 40-48%.  More troubling the Company announced that it had “discovered errors in its previously issued 2005 annual and 2006 quarterly financial statements in connection with certain specific expert compensation model calculations.” 

We are investigating and it appears that investors who purchased stock from February 28, 2006 to January 25, 2007, are affected.

Trouble for Hornbeck (HOS) Shareholders

Hornbeck Offshore Services, Inc. (HOS) provides offshore supply vessels (OSV) for the offshore oil and gas industry primarily in the United States Gulf of Mexico and internationally.

It has been alleged that while the Louisiana-based Company painted a glowing future and sold $220 million in convertible senior notes, its future wasn’t really near that glowing.  When the true condition of the Company began to emerge its stock dropped precipitously.  Specifically, on January 10, 2007, Hornbeck lowered its 4Q:06 earnings guidance from between $0.72 to $0.77 per share to between $0.61 and $0.63 per share.  The Company attributed this guidance revision to, among other things, volatile market conditions for offshore supply vessels in the Gulf of Mexico, shipyard delays and unscheduled repairs, and increased operating costs. It stock dropped over 20% on this news.  We are investigating and it appears that investors who purchased HOS between November 1, 2006 and January 10, 2007, are affected.

Investigation of Commerce Bancorp (CBH)

Yesterday, January 16, 2006, before the opening on trading, Cherry Hill, New Jersey-based Commerce Bancorp, Inc. (CBH) disclosed, among other things, that  “Commerce has been advised that an investigation is being conducted by the Office of the Comptroller of the Currency, in conjunction with the Board of Governors of the Federal Reserve System. Commerce has further been advised that the scope of the investigation will include but not be limited to transactions with its officers, directors and related parties, including transactions involving bank premises. Commerce is fully cooperating with the OCC and the Federal Reserve with respect to the investigation.”

Not surprisingly, the market reacted very negatively to this news.

The reason for the investigation is troubling.  The Wall Street Journal reports that the investigation may relate to an unspecified number of operating leases for "land and bank premises" with entities in which the Company’s CEO is a partner.  In 2005, the company paid a total of about $1.9 million under the leases. Commerce has built bank branches on at least some of the land, according to past regulatory filings.

One has to wonder what the Board of Commerce Bancorp was thinking to permit such transactions.