An Arkansas law firm is going after NovaStar Financial Inc. on behalf of investors who have seen their shares fall $30 during the past year.
Cauley Bowman Carney & Williams PLLC announced Tuesday it filed a class action lawsuit in U.S. District Court for the Western District of Missouri against NovaStar.
The Kansas City, Mo.-based real estate investment trust violated "federal securities laws, Sections 10(b) and (20)a of the Securities Exchange Act of 1934 and Rule 10b-5," according to the announcement.
NovaStar issued "a series of material misrepresentations to the market which had the effect of artificially inflating the market price," Cauley Bowman claims. NovaStar's Feb. 20 announcement that it expected "to earn little or no taxable income in the next five years" caused shares of the company to fall 42 percent.
"The company believes the lawsuit is completely without merit and intends to vigorously defend against it," NovaStar spokesman Richard Johnson told MortgageDaily.com in a telephone interview.
Prospective plaintiffs include people who invested in the company from May 4, 2006 to Feb. 20, 2007, the Little Rock-based law firm said in the statement. Lead plaintiffs reportedly have until April 24 to move the court.
Shares of NovaStar, traded under the symbol NFI, were up $0.34 this morning to $8.30. The stock had traded as high as $38.49 on May 1, 2006.
Several law firms filed litigation against New Century Financial Corp. following a big decline in shares of its stock after it disclosed earlier this month it would restate financials. The lawsuits, reportedly filed in the U.S. District Court for the Central District of California, seek class action status and accuse New Century of violating federal securities laws.
Shareholders Sue New Century
Several law firms filed litigation against New Century Financial Corp. following a big decline in shares of its stock after it disclosed last week it would restate financials.