- Company Name
- Kraton Corporation
- Stock Symbol
- Class Period
- October 25, 2017 to February 21, 2018
- Motion Deadline
- April 27, 2018
- Southern District of Texas
The complaint charges Kraton and certain of its officers with violations of the Securities Exchange Act of 1934. Kraton produces and sells styrenic block copolymers and other engineered polymers in the Americas, Europe, the Middle East, Africa and Asia. Kraton produces Cariflex, a polyisoprene product used in the production of gloves, medical products, adhesives, tackifiers, paints, coatings and photoresistors, in its Paulinia, Brazil manufacturing facility.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Kraton’s business and operations, including that Kraton had been transitioning customers to its Cariflex product produced using a new manufacturing process in its Brazilian facility, even though certain customers had already rejected the product, and the returns of the Cariflex product due to the processing issues would have a negative financial impact on Kraton’s fourth quarter 2017 operating income. As a result of this information being misrepresented or concealed from the market, Kraton securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of $52.80 per share.
On February 21, 2018, Kraton filed its annual report on Form 10-K for the year ended December 31, 2017. The 10-K disclosed that certain of Kraton’s customers had issues with the Cariflex product manufactured in the Company’s Brazilian facility, which would negatively impact the Company’s earnings. According to the 10-K, in the third quarter of 2017, Kraton had “initiated a new manufacturing process for [its] Cariflex product at [its] manufacturing facility in Paulinia, Brazil,” and while the “material produced using this new process met technical specifications, during the fourth quarter 2017, some customers notified [Kraton] that they were experiencing processing issues with the material.” The 10-K stated that “the degree of issues noted by [its] customers varied, and in certain cases the material was returned” for evaluation, which would result in a “negative financial impact to [the Company’s] fourth quarter 2017 operating income . . . of $7.6 million.” On this news, the price of Kraton shares fell $7.69 per share, or over 15%, to close at $43.10 per share on February 21, 2018.