A Minnesota federal judge has certified a class of investors suing Best Buy Co. Inc. and top executives. It’s alleged that the company misled shareholders about performance and expectations resulting in artificially inflated share prices during a three-month period in 2010. U.S. District Judge Donovan W. Frank approved the class. Shareholders who purchased Best Buy common stock between 10 a.m. Sept. 14, 2010, and Dec. 13, 2010 are included in the class. It’s alleged that the company’s shares traded artificially high during the class period based on misstatements by Best Buy and several of its officers and directors.
In his order, Judge Frank wrote that the class had successfully proven its members were entitled to the presumption of reliance, and had proposed a model that calculates damages caused by the alleged fraud on a classwide basis. It’s alleged that Best Buy boasted a healthy demand for its electronic products and projected that its fiscal year 2011 earnings per share would hit $3.55-$3.70. As a result, according to allegations in the suit, Best Buy stock maxed out at $44.81 per share between Sept. 14 and Dec. 13, 2010. When Best Buy released its third-quarter results, however, it revealed that its product sales were falling, a trend that began in June 2010, according to the Plaintiffs. There was a 14 percent drop in Best Buy’s share price closing at $34.52 on Dec. 14, 2010.
The Plaintiffs contended that the company and its executives made numerous misstatements and omissions about its financial well-being in news releases, conference calls and public meetings, and that it acted with “scienter,” knowing or recklessly disregarding the truth about Best Buy’s state. The judge wrote in his order that the Plaintiffs showed that the stocks increased after the allegedly misleading statements were made and dropped after they were revealed to be untrue, and found the Plaintiffs successfully proposed a model to calculate damages.
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