Beer Marketer's Insights - New Investor Suits Escalate Claims Against STZ Execs, Bd Based on Same "False" Wine Comments

After proposed class action lawsuit filed by a disappointed investor in Feb, Constellation racked up 2 more fed suits in last 2 mos, all built on same assertions about co's extra-soft wine biz, much of which co sold to The Wine Group earlier this mo for ~$900 mil. Second investor suit followed about 1 mo after the first, then just this wk, a 3rd suit hit same fed ct in NY. All 3 are based on the same allegedly "materially false and misleading statements" made between April 11, 2024 and Jan 8, 2025. But 2d and 3d suits take slightly different forms and ratchet claims up even further. The pair of more recent suits brought by single investors allege violations of fed investing laws by STZ ceo Bill Newlands, cfo Garth Hankinson and its bd of directors, claiming the execs and bd harmed the company itself. So these investors assert so-called "derivative" claims "on behalf of Constellation" itself. They seek to recoup additional losses and costs, including those associated with defending against the earlier proposed class action investor suit. Both suits ding the co for $668 mil in share repurchases made from Apr-Nov. Co allegedly "overpaid" for those shares by $178.5 mil, suits claim, based on the differences between the prices at the times of the purchases and the "real" value of the stock, or its price in Jan.Each successive suit built on the claims of the prior one. So in addition to above, the 3d suit filed this wk asserts that 5 execs and bd members "engaged in improper insider sales, netting combined total proceeds of over $81.6 million." That's based solely on sales of stocks during the "relevant period" of Apr '24 to early Jan '25. During that period, Newlands sold a total of about 61,400 shares for $15.4 mil in 4 transactions and Hankinson sold nearly 33,700 shares for $8.1 mil. Robert Sands sold much more of the co's stock last fall, generating $43.4 mil from the sale of almost 180K shares in Oct and Nov. His brother Richard Sands sold over 60K shares for $14.4 mil and one bd member, Daniel McCarthy, sold 1,854 shares for $468K.These actions amount to conspiracy, the new suit this wk charges, claiming that execs and the bd aided and abetted each others' individual breaches of fiduciary duty and efforts to "artificially inflate" the stock price. And tho legal claims in the 2d and 3d suits are slightly different from the initial proposed class action, they still face some of the same high legal bars. To make at least some of these claims stick, plaintiffs need to prove that execs and the bd intentionally misled them. And all 3 suits cite essentially the same public comments during co's earnings calls, financial conferences and fed filings. Plaintiffs specifically highlight statements about the "potential" that Bill, Garth and co saw for STZ's ailing wine biz and the improvements they "believe[d]" would come even while alerting investors that they expected "overall volume growth to remain challenged."

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New Investor Suits Escalate Claims Against STZ Execs, Bd Based on Same "False" Wine Comments

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