Thursday, January 17, 2019

Maxar Technologies Hit With Class Action Lawsuit Over "False and Misleading Statements." More Lawsuits On the Way

          By Chuck Black

Westminster CO based Maxar Technologies has been hit by a class action lawsuit from disgruntled Maxar shareholders.

The claim accuses Maxar of using its $2.4Bln US ($3.2Bln CDN) acquisition of Westminster CO based DigitalGlobe in 2017 to inflate company assets and hide problems with at least one of the vendor’s satellites, the DigitalGlobe WorldView-4 Earth imaging satellite reported lost earlier this month.

As outlined in the January 14th, 2019 filing in the United States District Court for the District of Colorado (Case 1:19-cv-00124-SKC) under the title "Logan Durant, et al. v. Maxar Technologies Inc., et al," the lawsuit claimed that Maxar executives, including ex-CEO Howard Lance, VP and CFO Biggs Porter and executive VP Michael B. (Anil) Wirasekara Jr., provided:
...materially false and misleading statements regarding the Company’s business, operational and compliance policies (during the period from March 29th, 2018 through January 7th, 2019). Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: 
  • Maxar improperly inflated the value of its intangible assets, among other accounting improprieties"
  • Maxar’s highly-valued WorldView-4 was equipped with CMGs that were faulty and/or ill-suited for their designed and intended purpose; and 
  • as a result, Maxar’s public statements were materially false and misleading at all relevant times...
The suit was filed by the New York NY and Chicago IL law offices of Pomerantz LLP on behalf of investor Logan Durant, who owns 250 shares of Maxar stock and was "willing to serve as a representative party of the class of investors who purchased or acquired Maxar stock" during the period covered by the suit.

Much of the case is expected to rest on the August 7th, 2018 Spruce Point Capital press release, "Spruce Point Capital Management Releases a Strong Sell Forensic Research Opinion on Maxar Technologies Ltd. (NYSE / TSX: MAXR)" which, along with accompanying research report, claimed that Maxar's "levered acquisitions" of Palo Alto, CA based Space Systems Loral in 2012 (when Maxar was known as the Richmond BC based MacDonald Dettwiler) and DigitalGlobe in 2017 were "poorly timed and executed with no free cash flow."

The Spruce Point report also claimed substantial "earnings overstatement," which caused investors to overvalue the stock and buy, when they should have been selling.

As outlined in the January 1st, 2019 post, "2018: The Year in Space for Canada," the Maxar stock meltdown was one of the big space stories of 2018. As outlined in the January 7th, 2019 post, "Maxar Stock Drops to New Lows After DigitalGlobe Subsidiary Reports Loss of WorldView-4 Satellite," the public acknowledgement of the loss of the WorldView-4 satellite caused Maxar stock to drop further.

Other law firms publicly exploring the possibility of either joining the existing action or perhaps beginning a separate one against Maxar include:
All things considered, the above list looks like a lot of high powered lawyers with a pretty good idea about where there next big meal is going to be coming from.

Don't expect any good news out of Maxar for the next little while.
Chuck Black.

Chuck Black is the editor of the Commercial Space blog.

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