XPO Logistics, Inc.
- Company Name
- XPO Logistics, Inc.
- Stock Symbol
- Class Period
- February 26, 2014 to December 13, 2018
- Motion Deadline
- February 12, 2019
- District of Connecticut
The complaint charges XPO and certain of its officers with violations of the Securities Exchange Act of 1934. XPO provides transportation and logistics services in the United States, North America, France, the United Kingdom, Spain, Europe, Asia, and internationally. The Company offers its services to customers in various industries, such as retail, e-commerce, food and beverage, manufacturing, technology and telecommunications, aerospace and defense, life sciences, healthcare, medical equipment, and agriculture.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose adverse information regarding XPO’s business, financial results and compliance polices. During the Class Period, the complaint alleges the Company was engaged in improper accounting practices that caused its financial results to be materially overstated, which included its accounting for numerous acquisitions, its “dubious tax accounting,” its under-reporting of bad debts, its reporting of phantom income through unaccountable acquisition earn-out liabilities, and its aggressive amortization assumptions, all of which were designed to portray glowing “Non-GAAP” results. As a result of this and other information being withheld from the market, the price of the Company’s stock was artificially inflated during the Class Period to a high of more than $115 per share.
Then on December 12, 2018, Spruce Point Capital Management (“Spruce Point”) published a report regarding XPO entitled “Trucking Ridiculous; End of the Road.” The Spruce Point report asserted that a “forensic investigation” into XPO had revealed “financial irregularities that conveniently cover [the Company’s] growing financial strain and inability to complete additional acquisitions despite repeated promises.” Spruce Point reported that it had uncovered, among other issues, “concrete evidence to suggest dubious tax accounting, under-reporting of bad debts, phantom income through unaccountable M&A earn-out liabilities, and aggressive amortization assumptions: all designed to portray glowing ‘Non-GAAP” results.” The Spruce Point report further stated that “XPO insiders have aggressively reduced their ownership interest in the Company since coming public, and recently enacted a new compensation structure tied to ‘Adjusted Cash Flow Per Share’ – defined in such a non-standard way that it is practically meaningless.” Spruce Point also reported that, “[i]n our opinion, XPO has used a nearly identical playbook [as United Rentals, Inc., another company founded by XPO’s CEO, which led] to its SEC investigation, executive felony convictions, and share price collapse.” Following publication of the Spruce Point report, XPO’s stock price plunged $15.77 per share, or more than 26%, to close at $44.50 per share on December 13, 2018.