Several law firms that specialize in class action suits have piled onto the initial shareholder class action lawsuit against Gander Mountain, claiming certain officers and directors within the company had prior knowledge about factors that devalued GMTN stock. The primary defendants named in the suit are the Erickson Family, the controlling shareholders of Gander Mountain.
The firm claims these officers and directors knew that unless the company went public, their shares in the company would “remain illiquid, and virtually worthless.” The allegations also state that the defendants knew that unless the company went public prior to revelations of lowered earnings expectations in November 2004 and January 2005, the company would be prevented from going public altogether.
Prior to going public, Gander Mountains fiscal 2004 full-year guidance was for per-tax income in the range of $16 million to $21 million. In November this guidance was nearly cut in half to $8 million to $13 million and in January it was lowered even further to $2.0 million to $4.0 million.
Since going public, GMTN has posted flat to declining quarterly comparable store sales.
The lawsuit claims that if GMTN were prevented from going public, this would “not only jeopardize [the] defendants ability to infuse value and liquidity into their shares via the IPO, but also would jeopardize the company’s ability to repay a $9.8 million debt owed to a company owned by the Erickson family.”
Gander Mountain has publicly stated that the lawsuit is “without grounds” and the company will “vigorously” defend itself.
