Secret witnesses may appear in overvaluation case

BVWireIssue #239-1
August 3, 2022

securities litigation
goodwill, business valuation, impairment, intangible assets, securities, trademark

In a New Jersey class action, plaintiff shareholders of publicly held Ascena Retail Group alleged that the company misrepresented the value of its goodwill and trade names to inflate the stock price artificially. Ascena, a clothing retailer, had acquired another clothing retailer (the parent company of Ann Taylor and LOFT) in 2015. In June 2017, the company announced a $1.3 billion impairment charge against the goodwill and trade names, causing its stock price to plummet. But the plaintiffs contend that the company should have taken the impairments earlier because there were multiple contemporaneous indicators that its assets were impaired. The company filed a motion to dismiss the complaint, and the court granted it but did so without prejudice. This allows the plaintiffs to amend their complaint and go back to court—and they say they have “confidential witnesses” that will show that the company knew the assets were impaired earlier.

There are many details in the case, which is In re Ascena Retail Grp., Inc. Sec. Litig., 2022 U.S. Dist. LEXIS 114434; 2022 WL 2314890, and a case analysis and full opinion are available on the BVLaw platform.

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