Dentsply Sirona, Inc.
- Company Name
- Dentsply Sirona, Inc.
- Stock Symbol
- Class Period
- Purchasers of Dentsply Sirona stock between February 20, 2014 and August 7, 2018; persons who purchased or acquired Dentsply International (“Dentsply”) stock in exchange for Sirona Dental Systems, Inc. (“Sirona”) stock in connection with the acquisition of Sirona by Dentsply; and holders of Dentsply shares as of December 2, 2015 who were eligible to vote on the Acquisition
- Motion Deadline
- February 18, 2019
- Eastern District of New York
The complaint charges Dentsply Sirona and certain of its officers and/or directors with violations of the Securities Exchange Act of 1934 and Securities Act of 1933. Dentsply Sirona develops, manufactures and markets an array of professional dental products and equipment. In February 2016, Dentsply International completed a $5.5 billion stock-for-stock acquisition of Sirona Dental Systems, Inc. to form Dentsply Sirona (the “Acquisition”).
The complaint alleges that during the Class Period, in numerous SEC filings and public statements, including the registration statement and joint proxy statement/prospectus issued in connection with the Acquisition, defendants made false and misleading statements and/or failed to disclose adverse information regarding Dentsply Sirona’s business and financial condition, including by misrepresenting the drivers of the Company’s financial performance. Specifically, defendants attributed the Company’s financial performance to the Company’s “innovation,” “operational improvement efforts,” “new products,” and “continued investments in sales and marketing,” and told investors that these factors helped the Company succeed despite the “highly competitive” market for its products. As a result of these misrepresentations, the price of Dentsply Sirona stock was artificially inflated to more than $68 per share during the Class Period.
In reality, however, the Company’s financial results had been buoyed by an anticompetitive scheme among the Company’s three primary distributors that suppressed competition in the dental supply market and artificially inflated the price of dental supplies sold by Dentsply Sirona. Further, defendants concealed that an exclusive distribution arrangement that Sirona had with one of its distributors, Patterson Companies, Inc. (“Patterson”), required Patterson to regularly make large minimum purchases regardless of demand and, as a result, by 2015, Patterson had been supplied with so much excess inventory that it could not be sold. This channel-stuffing rendered the Company’s reported sales, financial results and guidance materially false and misleading. In addition, the Company represented that it reported its financial statements, including its goodwill, in accordance with generally accepted accounting principles, or GAAP. In reality, the Company’s reported goodwill was artificially inflated and not reported in accordance with GAAP because it did not reflect the financial impact of the anticompetitive scheme.
The truth about Dentsply Sirona’s financial condition and business was revealed in a series of corrective disclosures beginning in August 2017, when the Company disclosed it was the subject of an investigation by the SEC. In October 2017 the Company announced the surprise departure of three of its top executives. In the following months, and culminating on August 7, 2018, Dentsply Sirona repeatedly revised its guidance downward and reported several quarters of disappointing financial results and significant goodwill impairment charges that were attributed to, among other things, an "increase in competition" and destocking from the Company’s dealer partners, including Patterson. In all, when the truth concerning the fraud and its impact on the Company’s financial condition was revealed to investors, the price of Dentsply Sirona stock had declined by over 42% from its Class Period high to close at $39.41 per share on August 7, 2018, its lowest price in five years.