Novastar Law Suit

Discussion in 'Wall St. News' started by marketsurfer, Mar 2, 2007.

  1. NEW YORK, March 01, 2007 /PRNewswire via COMTEX/ -- Dreier LLP ( today announced that a class action lawsuit was commenced in the United States District Court for the Western District of Missouri, on behalf of purchasers of the common stock and/or call options and/or sellers of put options of NovaStar Financial, Inc. ("NovaStar" or the "Company") during the period May 4, 2006 through February 20, 2007, inclusive (the "Class Period"). The complaint alleges violations of the federal securities laws, including Section 10(b) of the Securities Exchange Act.

    If you purchased NovaStar common stock or call options during the Class Period or sold NovaStar put options during the Class Period, you may be a member of the proposed Class. You must move the Court on or before April 24, 2007 if you wish to serve as a lead plaintiff. Lead plaintiffs must meet certain legal requirements. To learn more about this lawsuit or if you are interested in serving as a lead plaintiff, please contact Plaintiff's counsel, Daniel B. Scotti ( of Dreier LLP at 800-952-8897. Class members may retain counsel of their choice and move the Court to serve as a lead plaintiff, or may choose to do nothing and remain absent class members.

    NovaStar is a real estate investment trust ("REIT") that is headquartered in Kansas City, Missouri. The Company describes itself as a specialty finance company that originates, invests in and services residential nonconforming loans. The Complaint alleges, among other things, that: (i) NovaStar's reported financial results during the Class Period were falsely inflated; (ii) Defendants misrepresented the quality of the Company's mortgage loan portfolio and its ability to pay dividends; (iii) Defendants failed to disclose that the Company's reported financial results and projections were based upon faulty assumptions because of inadequate internal controls; and (iv) Defendants failed to disclose that the Company lacked a reasonable basis to make projections regarding its ability to maintain its status as a REIT. The Complaint further alleges that, as a result of these false statements and omissions, NovaStar's securities traded at artificially inflated or distorted prices. On February 20, 2007, after the close of trading, NovaStar shocked the market by announcing disappointing fourth quarter and year end 2006 financial results and warning that the Company expected to make very little, if any, REIT taxable income for the next four years. In reaction to this news, the price of the Company's stock declined more than 30% on extremely high trading volume. The Plaintiff seeks to recover damages on behalf of all members of the proposed Class.

    The Plaintiff is represented by Dreier LLP and Gutride Safier LLP. Dreier LLP's Class Action Litigation Group has vast experience representing domestic and foreign institutional and individual investors in securities and other class actions throughout the country. The partners who head Dreier LLP's Class Action Litigation Group have successfully prosecuted securities fraud class actions in a wide variety of industries and have played a significant role in cases that have resulted in some of the largest securities class action settlements.

    SOURCE Dreier LLP

    Daniel B. Scotti, of Dreier LLP, +1-800-952-8897,

    Copyright (C) 2007 PR Newswire. All rights reserved ********************************************************************** As of Sunday, 02-25-2007 23:59, the latest Comtex SmarTrend(SM) Alert, an automated pattern recognition system, indicated a DOWNTREND on 12-15-2006 for NFI @ $28.96. For more information on Comtex SmarTrend? Alert, contact your market data provider or go to SmarTrend is a registered trademark of Comtex News Network, Inc. Copyright ? 2004-2007 Comtex News Network, Inc. All rights reserved.
  2. Mvic


    Hope you get some of your money back surf.
  3. :D

    this could be the death blow-- delisting anyone?

    those books get examined----bwahaHAHAHAAAHAHAHA

  4. Mvic


    Were you looking for a bounce when you 1st were interested in NFI or was it something more, or maybe part of a strategy (hedge against a YM short)? I am holding GM and CFC short still on the assumption that the whole subprime fiasco has yet to really matter but don't like that the bid for them is so strong which is why I am asking about your reasons behind NFI.

  5. no, it was just an information rumour, that i took seriously due on the source. obviously very wrong at the time--- not sure how this will pan out for the industry, but i do believe Novastar may not survive.

    good luck!

  6. Trading on rumours. Good strategy.
    That's only going to lead to wipeouts! :)

    As far as the class action suit goes, everytime a stock gets smashed some firm files a class action suit. Happens all the time. Shareholders rarely get anything. The lawfirm collects a nice fee. Good 'ole lawyers. LOL.


  7. :D :D

    great photo. informational arbitrage works--- positoned sized correctly, it can be a very lucrative endeavor.

  8. does any one any additional info on this situation. info i may have missed? thanks, surf
  9. Why don't the short sellers ever sue companies who beat expectations? These companies obviously misled Wall St by issuing low expectations then beat them handily. This can be construed as manipulation of the short sellers, right? Funny we've never seen one of these :D
  10. Mvic


    Thanks surf, and I agree nothing wrong with trading on rumor from credible source with appropriate size.

    I think with these sub prime lenders left it all has to do with what loans they are carrying and have default liability for. Also if they are hedged with CDS at a good price. My guess is that there will be some really winners in the group who were conservative and hedged their exposure early on. These survivors will reap the rewards of being the few players left when the dust settles, especially if they get the rate cuts that people still seem to be expevcting. They may also be the targets of takeovers as their stock price will be depressed due to being part of the depressed group. Without being able to look at their balance sheet though it is hard to tell who is positioned well and who isn't. In lieu of that type of information perhaps it is worth looking at who the brokerages and banks seem to be interested in. I thought an article recently about Citi disclosing a 5% ownership in one of the sub prime lenders and Merrill I think has bought one or part pf one (the infusion of capital that these banking/broker relationships provide would allow the survivors to buy illiquid portfolios at firesale prices and profit handsomely in the long run). Those are the ones that probably present an opportunity when the bottom is in in the sector.

    CFC surprisingly had a pretty decent bid all week but the fact that insiders have been selling so aggressively is a concern and also with the margins on these loans being so much lower now due to the cost of default insurance and the fact that many fewer loans are getting written I don't see how they can still be priced well above where they were back when things still looked good and housing was rocking in 03-05. Maybe they are buying up other portfolios at firesale prices? The BoA talk would have made sense but if the CEO of BoA is to be believed there will not be a deal (they would know CFC's book and probably don't like what they see hence no deal) and the stock should reflect that Monday. If it continues to catch a bid next week then either BoA is misleading us or someone else is interested and it might be a good long candidate once the group bottoms or as a hedge against other subprime shorts.
    #10     Mar 3, 2007