Grant & Eisenhofer Files Class Action Lawsuit Against MGP Ingredients, Inc. on Behalf of Pension Fund

Rhea-AI Summary

MGP Ingredients (NASDAQ:MGPI) faces a class action lawsuit filed by Operating Engineers Construction Industry Miscellaneous Pension Fund for allegedly misleading investors about its business and financial results. The lawsuit claims MGPI made false statements about its ability to manage inventory and sales projections during an industry-wide slowdown in hard liquor sales following the COVID-19 period.

The company's stock suffered two significant drops: a 29.5% decline on October 17, 2024, following announcements of demand slowdown and excess inventory, and another 14.7% drop on October 31, 2024, after revealing greater-than-expected inventory impacts. The total stock decline of nearly 50% erased hundreds of millions in market value.

The class period covers May 4, 2023, through October 30, 2024. Affected investors have until February 14, 2025, to seek appointment as lead plaintiff.

Positive

• None.

Negative

• Stock price collapsed nearly 50% following two negative announcements
• Company faces class action lawsuit for alleged securities fraud
• Significant inventory management issues and demand slowdown revealed
• Alleged misleading statements about business outlook and financial projections
• Market capitalization loss in hundreds of millions of dollars

Insights

Legal Expert

This securities class action lawsuit against MGPI represents a significant legal challenge, alleging violations of federal securities laws through misleading statements about inventory management and market conditions. The 29.5% and 14.7% stock drops following revelations about inventory issues and demand slowdown provide strong evidence of materiality. The February 14, 2025 lead plaintiff deadline gives affected investors ample time to evaluate their options.

The complaint's focus on post-COVID inventory management and allegedly false assurances about market positioning suggests a compelling theory of liability. The timing and magnitude of the stock price declines following corrective disclosures strengthen the plaintiffs' case for loss causation. This lawsuit could result in significant financial implications for MGPI if successful.

Financial Analyst

The lawsuit highlights serious operational and disclosure issues at MGPI, particularly concerning inventory management and demand forecasting. The nearly 50% total stock decline represents a substantial loss of shareholder value, indicating the market's severe reaction to the revelations. The company's alleged failure to properly account for post-COVID normalization in spirits demand suggests potential weaknesses in management's forecasting abilities and internal controls.

The sequential nature of the disclosures - first on October 17 and then again on October 31 - raises questions about the completeness of initial disclosures and management's grip on the situation. This inventory overhang could pressure margins and cash flow in coming quarters as the company works to right-size its stock levels.

NEW YORK--(BUSINESS WIRE)-- Institutional investor Operating Engineers Construction Industry Miscellaneous Pension Fund filed a class action lawsuit today against MGP Ingredients, Inc. (NASDAQ:MGPI) (“MGPI” or the “Company”), David Colo, David S. Bratcher, and Brandon M. Gall, alleging they defrauded investors by issuing false and misleading statements concerning the state of MGPI’s business and financial results with regards to selling hard spirits and overstocking products.

The suit, brought in federal court in the United States District Court for the Southern District of New York was filed by leading investor law firm Grant & Eisenhofer P.A.

The action is brought on behalf of all persons or entities who purchased or acquired MGPI common stock between May 4, 2023 through October 30, 2024, inclusive (the “Class Period”). The action is captioned Operating Engineers Construction Industry Miscellaneous Pension Fund v. MGP Ingredients, Inc., David Colo, David S. Bratcher, and Brandon M. Gall, No. 1:24-cv-09685 (S.D.N.Y.).

The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Specifically, MGPI is a manufacturer of hard liquors such as tequila, bourbon, rye, whiskey, vodka, and gin. MGPI sells the spirits it produces under its own brands as well as to other alcohol distributors and brands. Prior to the Class Period, sales of hard liquors, such as those produced and sold by MGPI, increased dramatically in the wake of COVID-19. However, as quarantines ended, sales of hard liquors slowed across the alcoholic beverage industry, and a backlog of inventory began to increase. During the Class Period, MGPI falsely assured investors that its projections and statements accounted for the industry slowdown and that it was well-positioned to avoid a buildup of inventory. The Company also incorrectly claimed that its projected sales took these industry trends into account.

The market was thus shocked when MGPI announced on October 17, 2024, that a slowdown in demand and an excess in inventories would undermine sales. This revelation caused the Company’s stock to plummet 29.5%. Then, less than two weeks later, on October 31, 2024, Defendants revealed that its excess inventory would have an even greater impact than previously reported. This caused the Company’s stock to drop another 14.7%, to a close of $49.04 per share on October 31, 2024. In total, MGPI’s share price declined nearly 50% on these two disclosures, wiping out hundreds of millions of dollars in market capitalization and damaging investors.

Investors who purchased or acquired MGPI common stock during the Class Period are members of this proposed Class and may be able to seek appointment as lead plaintiff, which is a court-appointed representative for the Class, by complying with the relevant provisions for the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). See 15 U.S.C. Section 78u-4(a)(2)(A)(i)-(iv). If you wish to serve as lead plaintiff, you must move the Court by no later than February 14, 2025, which is lead plaintiff deadline that was established by publication of this notice on December 16, 2024. You do not need seek to become a lead plaintiff in order to share in any possible recovery. You may also retain counsel of your choice to represent you in this action.

If you wish to discuss this action or have any questions concerning this notice or your rights, please contact Caitlin M. Moyna at Grant & Eisenhofer at 646-722-8513, or via email at cmoyna@gelaw.com. You can also find more information at gelaw.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241216321169/en/

Grant & Eisenhofer

Caitlin M. Moyna

646-722-8513

cmoyna@gelaw.com

Source: Grant & Eisenhofer P.A.

FAQ

What caused MGPI stock to drop 50% in October 2024?

MGPI stock dropped due to two announcements: a 29.5% decline on October 17 following news of demand slowdown and excess inventory, and a 14.7% drop on October 31 after revealing greater-than-expected inventory impacts.

What is the class action lawsuit against MGPI about?

The lawsuit alleges MGPI defrauded investors by making false and misleading statements about its business conditions and financial results regarding hard spirits sales and inventory management during May 4, 2023, through October 30, 2024.

When is the deadline for MGPI investors to join the class action lawsuit?

Investors have until February 14, 2025, to seek appointment as lead plaintiff in the class action lawsuit against MGPI.

What is the class period for the MGPI lawsuit?

The class period covers investors who purchased or acquired MGPI common stock between May 4, 2023, through October 30, 2024.

How much did MGPI stock close at after the October 31, 2024 announcement?

MGPI stock closed at $49.04 per share on October 31, 2024, following the second negative announcement about inventory impacts.