On March 30, 2015, Motley Rice attorneys, along with co-counsel, helped secure a $131 million settlement with Sprint for institutional investors.* The plaintiffs—United Steelworkers' Pace Industry Union-Management Pension Fund, Skandia Mutual Life Insurance Company and the West Virginia Investment Management Board—alleged that the company misled them about the progress of its merger with Nextel. Motley Rice represented United Steelworkers' Pace Industry Union-Management Pension Fund and Skandia Mutual Life Insurance Company.
Although Sprint Nextel continues to deny all allegations of false or misleading statements regarding the company’s customer base and financials, it agreed to this settlement, which amounts to about 12 percent of the plaintiffs’ estimated $1.079 billion in damages, if all class members participate.
“This settlement is a powerful result for our clients,” said Motley Rice securities attorney Jim Hughes. “Similarly situated cases typically have a median ratio of around two percent, so 12 percent is a significant achievement for the hundreds of Sprint bond and stock holders involved in this class action.”
Losing customers and cash flow
Almost immediately following Sprint’s $37.8 billion acquisition of Nextel in August 2005, plaintiffs alleged that “cultural differences” between the two companies made it impossible to integrate Sprint’s and Nextel’s wireless networks, leading to a steep loss in its overall customer base. In January 2008, Sprint revealed a net loss of 683,000 post-paid subscribers in the fourth quarter of 2007, which resulted in company stock dipping 24.8 percent that same day. The next month, Sprint issued a press release stating that "the company recorded a non-cash goodwill impairment charge of $29.7 billion" contributing to a "net loss for the quarter [of] $29.5 billion or $10.36 diluted loss per share." Following this announcement, Sprint’s stock fell another 20 percent.
In all, Sprint’s stock price dropped almost 70 percent from its class period high in a little more than six months, from $23.25 per share to less than $7.15 per share.
Impact on Investors
On behalf of investors who purchased stock between the class period of October 2006 and February 2008, plaintiffs filed a class action in 2009; alleging that Sprint, Sprint’s former Chairman and Chief Executive Officer Gary D. Forsee and other company officials issued a series of false and misleading statements during the class period in an attempt to cover up the growing customer base problems and integration issues while falsely inflating its publicly traded securities price. When the truth about these issues was finally revealed, the stock price plummeted and investors suffered billions of dollars in damages.
The case is Cora E. Bennett v. Sprint Nextel Corp. et al., No. 2:09-cv-02122, in the U.S. District Court for the District of Kansas.
Motley Rice proudly represents unions and other institutional investors in class actions. Read more about Market Monitor, our portfolio monitoring service, and about our work with shareholders to preserve their investments.
Reuters (Mar 31, 2015): Sprint settles U.S. class-action lawsuit for $131 million
Bloomberg (Mar 31, 2015): Sprint Agrees to Pay $131 Million to Settle Shareholder Suit
*Prior results do not guarantee a similar outcome.