Two law firms have filed class action lawsuits against NexCen Brands, the owner of The Athlete's Foot, alleging the company violated securities laws. On May 19, NexCen said due to liquidity issues, “there is substantial doubt about its ability to continue as a going concern.”  The stock subsequently fell more than 75 percent.

The problem stems from the company's acquisition of Great American Cookies in January. To help fund the acquisition, the company amended its credit facility with BTMU Capital Corp. to allow it to borrow another $70 million.

In a press release, The Rosen Law Firm said it filed its class action lawsuit on behalf of purchasers of NexCen Brands common stock during the period between May 10, 2007 and May 19, 2008. Its complain asserts that NexCen and certain of its officers and directors failed to adequately disclose to investors certain details of an accelerated-redemption feature on financing it obtained in connection with its acquisition of Great American Cookies, which required the company to pay half of its borrowing by a date certain; that the company was unable to comply with the accelerated-redemption; that the Company had no reasonable basis for its earnings guidance for fiscal 2008; and consequently, the company's ability to continue as a going concern was in serious doubt.

A similar lawsuit was filed by Dyer & Berens LLP.