(CN) – Philip Morris executives sold off millions of dollars stock while withholding information about the company’s stagnant sales, investors claim in a class action.
Fild by lead plaintiff City of Westland Police and Fire Retirement System in the U.S. District Court for the Southern District of New York, the lawsuit is on behalf of anyone who purchased Philip Morris stock between Feb. 8, 2018 and April 18, 2018. CEO Andre Calantzopoulos, CFO Martin G. King, and COO Jacek Olczak are named as defendants along with the New York-based cigarette and tobacco manufacturing multinational.
According to the complaint, Philip Morris was experiencing lower sales for years attributed to a decline in smokers worldwide, but throughout the period in question, investors were assured that “new sales initiatives” and “favourable sales trends” were working to combat the issue.
Philip Morris executives allegedly knew that positive statements made at the end of 2017 into first quarter 2018 were untrue, specifically that the company suffered a faster decline in first quarter 2018 sales than investors were aware of, and that sales initiatives had stalled in key markets such as Japan, the lawsuit alleges.
While stock prices were artificially inflated, on Feb. 22, 2018, Philip Morris insiders, namely Calantzopoulos, sold 49,000 shares at $103.66 per share for more than $5 million in “gross insider trading proceedings,” the class claims, adding that Calantzopoulos did this one day after making “rosy statements” about sales trends and the company’s future revenue to investors.
Fast forward to April 19, 2018, Philip Morris revealed disappointing results for first quarter 2018 caused by a decline in cigarette and heated tobacco shipments, also telling investors that the company’s heated tobacco unit growth had plateaued. The news triggered the company’s stock price to drop $15.80 per share closing at $85.64 per share that day.
“This represented the worst daily decline for the company in nearly a decade and a closing price more than 17% below the price at which defendant Calantzopoulos had sold his Philip Morris stock less than two months before,”
The class is represented by Samuel H. Rudman of Robbins Geller Rudman & Dowd LLP in Melville, N.Y., with David C. Walton and Brian E. Cochran in San Diego and Thomas C. Michaud of Vanoverbeke, Michaud & Timmony in Detroit.