Fracking Firm Touted ‘Extraordinary Turnaround’ as Demand Tanked, Class Claims

(CN) – FTS International Inc. stockholders claim in a class action that information about the company’s finances and operations was withheld in connection with its initial public offering last year.

Founded in 2000, FTSI provides hydraulic fracturing services, known as “fracking,” in North America. The lawsuit was filed in the District Court for Dallas County, Texas against FTSI, its senior officers, several controlling shareholder entities and the company’s financial advisors Credit Suisse and Morgan Stanley.

According to the lawsuit, from 2014 to 2016, oil and natural gas prices declined, leading to a decrease in demand for FTSI’s services, but at the time of its IPO, “FTSI claimed that it was in the midst of an extraordinary turnaround following this market downturn,” the class alleges. Consequently, FTSI reported that for the first nine months of 2017, its total revenues surged by 165 percent to over $1 billion.

However, unbeknownst to investors at the time of the IPO, FTSI “was facing several adverse trends in its business.”

FTSI allegedly failed to disclose in registration statements filed with the Securities Exchange Commission that the market was experiencing “intense and increasing competition,” that FTSI was in no position to benefit from increased demand for fracking services, “but rather positioned to lose market share and decelerating revenue growth as competitors flooded the market, and that the company was unable to increase its fleet size and instead needed to reduce it."

Moreover, shareholders allege that price increases implemented by the company failed to reflect “sustained market power” and limited FTSI’s ability to secure new contracts..

FTSI’s stock price has declined since the IPO, falling to $9.29 per share on Feb. 13, 2019, almost 50 percent less than investors paid during its February 2018 IPO.

The class is represented by Joe Kendall and Jamie J. Gilmore in Dallas, Brian E. Cochrane and Michael Albert of Robbins Geller Rudman & Dowd LLP in San Diego with Samuel H. Rudman in Melville, N.Y., and Michael I. Fistel, Jr. of Johnson Fistel LLP in Marietta, Ga.

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