LAS VEGAS (CN) - Executives at the Las Vegas Sands published false statements about the company's success and development of the Venetian Macau Resort in China, which artifically inflated the prices of stock, a couple claims in a proposed class action filed Wednesday in Federal court on behalf of "hundreds of thousands" of investors.
Investors Wendell and Shirley Combs filed the lawsuit on behalf of ivestors who bought the company's stock between June 13, 2007 and Nov. 11, 2008.
In their 37-page lawsuit, the couple accuses Sands CEO Sheldon Adelson and former COO William Weidner of a welter of financial misdeeds.
The couple says Adelson and Weidner drafted and distributed to shareholders "misstatements" that they knew were "materially false and misleading."
In the complaint, the couple says the company issued a news release on June 13, 2007, announcing that the Venetian Macao Resort Hotel, "Asia's first fully integrated resort and the anchor property of the company's Cotai Strip development, will open on Aug. 28, 2007."
A second news release was issued Aug. 1, 2007, announcing that the company's net revenue had increased 18.6 percent to a record $612.9 million, compared to $517 million for the same quarter the previous year.
"With respect to its operations in Macau, the company reported that 'second quarter casino revenues increased 21.6 percent to an all-time quarterly record $373.5 million, versus $307.1 million in the 2006 period," the lawsuit states.
The next day, the company's stock price jumped $6.63 per share, or 7.74 percent, and closed at $92.31 per share. "The stock price climbed a total of $15.84 per share, or 16.1 percent, to close at $108.15 per share, over the next five trading days," according to the complaint.
The Combs say the company then released another statement on Sept. 5, 2007, "in which it continued to emphasize its prospects in Macau and represented to the market that business would prosper there."
The release also said the project had attracted an "unprecedented amount of visitors," and that transportation to and from the property ran smoothly for guests to travel across the region.
The company's stock price rose from $102.98 per share on Sept. 6, 2007 to $144.56 per share per share on Oct. 2, 2007.
Plaintiffs say the company then issued another news release announcing its financial results for the third fiscal quarter ending Sept. 30, 2007, reporting that the company's revenue had jumped 19.5 percent to a record $661 million, versus the $553.2 million in the third quarter the previous year.
"Although the company's stock price suffered a string of consecutive declines, the stock price was nevertheless buoyed by defendants' statements concerning the Macau operations," the lawsuit states.
Several days after the Sands announced the launch of a high-speed ferry between Hong Kong and Macau on Nov. 30, 2007, stock prices rebounded.
But on Dec. 11, 2007, the Sands was forced to report that the ferry service was suspended due to legal issues.
Turns out that "increasing competition in Macau was steadily eroding the company's foothold in the region, which undermined defendants' representations that everything was proceeding according to plan," the lawsuit states."
In addition, "the company was facing a significant liquidity crisis as a result of its ongoing expenditure of capital in Macau and Singapore, which forced the company to divert funds from other operations to develop its Asian properties," the lawsuit states."