Covetrus sued for allegedly misleading investors
File Photo / William Hall
Covetrus, which is building new headquarters in downtown Portland to accommodate an estimated 1,200 employees, faces a federal lawsuit over alleged securities law violations.
Covetrus Inc. (Nasdaq: CVET), the multinational animal-health products company headquartered in Portland, is being sued in a New York federal court by investors who claim Covetrus made false and misleading statements about its capabilities before going public in February.
The class-action suit was filed Monday by the City of Hollywood (Fla.) Police Officers’ Retirement System. In the filing, the plaintiff said it purchased Covetrus stock at artificially inflated prices and then lost money when the company reported disappointing financial results in August.
The suit alleges Covetrus violated securities laws by overstating its ability to manage inventory and supply chain services, while understating a variety of costs and business threats. They included the impact of online competitors and the loss of a large North American customer, as well as the expense of forming the company from the merger of Vets First Choice and the animal-health division of Henry Schein Inc. (Nasdaq: HSIC).
The merged company, whose businesses together had revenues of $4 billion in 2018, debuted Feb. 8 on Nasdaq. The stock initially traded at over $40.
But on Aug. 13, after its first full quarter of operations, Covetrus reported a $10 million loss and slashed its annual earnings forecast from $250 million to $200 million. Overnight, the price of Covetrus shares plummeted 40%.
“When the defendant’s misrepresentations and fraudulent conduct were disclosed, the price of Covetrus common stock fell precipitously as the prior inflation came out of the prices of the companies’ securities,” the plaintiff’s complaint said.
The suit seeks unspecified damages. Covetrus and Henry Schein Inc. are named as defendants, as well as Covetrus President and CEO Benjamin Shaw and Chief Financial Officer Christine Komola.
Attempts to reach Covetrus for comment were not immediately successful.
Shaw’s father, Covetrus Chairman David Shaw, resigned from his role last month, although he remains on the company’s board. The two Shaws co-founded Vets First Choice in 2010.
Earlier this year, Covetrus settled a suit brought by IDEXX Laboratories (Nasdaq: IDXX), founded by David Shaw. The suit alleged that Vets First Choice misappropriated trade secrets after hiring two former IDEXX employees.
Trading of Covetrus shares opened at $11.69 Wednesday after reaching a high of $12.24 Tuesday. The price remains little changed from the level it fell to after Covetrus reported its quarterly results.
Editor's Note: This article was revised to indicate the correct location of the federal court.
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