Shareholder Class Action Filed Against AgFeed Industries, Inc. by the Law Firm of Kessler Topaz Meltzer & Check, LLP

^{Published on 2011-11-02 18:20:45 - Market Wire}
 

Shareholder Class Action Filed Against AgFeed Industries, Inc. by the Law Firm... -- RADNOR, Pa., Nov. 2, 2011 /PRNewswire/ --

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RADNOR, Pa., Nov. 2, 2011 /PRNewswire/ -- The following statement was issued today by the law firm of Kessler Topaz Meltzer & Check, LLP:

Notice is hereby given that a class action lawsuit was filed in the United States District Court for the Middle District of Tennessee on behalf of purchasers of the securities of AgFeed Industries, Inc. ("AgFeed" or the "Company") (NASDAQ: [ FEED ]), who purchased or otherwise acquired AgFeed securities between March 12, 2008 and September 29, 2011, inclusive (the "Class Period").  If you are a member of this class, you can view a copy of the Complaint or join this class action online at [ http://www.ktmc.com/cases_details.php?id=52 ].

Members of the class may, not later than December 19, 2011, move the Court to serve as lead plaintiff of the class.  A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation.  In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class.  Your ability to share in any recovery is not, however, affected by the decision of whether or not to serve as a lead plaintiff.  Any member of the purported class may move the court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. 

The Complaint charges AgFeed and certain of its officers and directors with violations of the Securities Exchange Act of 1934.  AgFeed is an international agribusiness with operations in the U.S. and China.  AgFeed has three business lines: Animal Nutrition, Hog Production and Harvesting.

Throughout the Class Period, the defendants made numerous positive statements about AgFeed's "record" operating income and revenue, while also touting the Company's supposedly large accounts receivable and low allowances for doubtful accounts.  During this period, however, AgFeed's customers were operating in a difficult economic environment and often had difficulty meeting their payment terms to AgFeed.  As a result, AgFeed often extended the payment terms for its customers.  In connection with these payments, the Company used its broad "formula-based analysis," causing AgFeed's bad debt levels to be incorrectly reported.  Among other things, AgFeed's "formula-based analysis" failed to take into account the individual characteristics of its customers, and resulted in AgFeed reporting artificially high accounts receivable while at the same time prolonging the Company's denial of its increasing levels of bad debt expense.

The Complaint alleges that the defendants failed to disclose and misrepresented the following material adverse facts which were known to them or recklessly disregarded by them: (1) that the Company's "formula-based analysis" was wholly inefficient and did not convey an accurate picture of the Company's financial position; (2) that as a result, the Company was overstating asset values and understating expenses; (3) that the Company was undervaluing allowances for doubtful accounts; (4) that the Company's financial statements were not prepared in accordance with Generally Accepted Accounting Principles ("GAAP"); (4) that the Company lacked adequate internal and financial controls; (5) that, as a result of the foregoing, the Company's financial statements were materially false and misleading at all relevant times; and (6) that defendants' financial guidance and statements about the Company's profitability and future prospects were lacking in any reasonable basis when made.

On August 2, 2011, AgFeed shocked investors when it announced disappointing quarterly financial results that were in stark contrast to the stellar financial results reported throughout the Class Period.  Specifically, AgFeed disclosed that it expected to post a quarterly loss of over $17 million and that it expected to decrease its accounts receivable by $14.2 million.  Upon the release of this news, shares of the Company's stock fell $0.65 per share, or over 32 percent, to close on August 2, 2011 at $1.34 per share, on unusually heavy trading volume. 

One week later, on August 9, 2011, AgFeed revealed in an SEC filing that the Company only had approximately $13.2 million in accounts receivable, and confirmed an approximate $7 million allowance for doubtful accounts.  For reference, just three months earlier, AgFeed reported $28.6 million in accounts receivable and a $1.9 million allowance for doubtful accounts. Also on August 9, 2011, AgFeed disclosed to the SEC that it was no longer planning to take its subsidiary, AgFeed Animal Nutrition Holdings, Inc., public.

Finally, on September 29, 2011, the Company disclosed that its Board of Directors had established a special committee to conduct an investigation in the accounting practices of AgFeed's Chinese operations.  Specifically, the committee is investigating AgFeed's accounting treatment of certain of the Company's Chinese farm assets acquired during 2007 and 2008 as used in its Hog Production business, as well as the validity and collectability of certain of the Company's accounts receivables relating to its Animal Nutrition business in China.  On this news, shares of the Company's stock fell $0.13 per share, or nearly 20 percent, to close on September 30, 2011 at $0.52 per share, on unusually heavy trading volume.  As the market continued to absorb this shocking news, AgFeed shares fell an additional $0.12 per share, or over 23 percent, to close on October 3, 2011 (the next trading day) at $0.40 per share, also on heavy trading volume.

If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP (Darren J. Check, Esq. or David M. Promisloff, Esq.) toll free at 1-888-299-7706 or 1-610-667-7706, or via e-mail at [ info@ktmc.com ].  For additional information about this lawsuit, or to join the class action online, please visit [ http://www.ktmc.com/cases_details.php?id=52 ].

Plaintiff seeks to recover damages on behalf of class members and is represented by the law firm of Kessler Topaz Meltzer & Check, which prosecutes class actions in both state and federal courts throughout the country.  Kessler Topaz Meltzer & Check is a driving force behind corporate governance reform, and has recovered billions of dollars on behalf of institutional and individual investors from the United States and around the world.

For more information about Kessler Topaz Meltzer & Check, or for additional information about participating in this action, please visit [ www.ktmc.com ].

SOURCE Kessler Topaz Meltzer & Check, LLP

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