A tactical victory was won by Las Vegas Sands Corp shareholders, when most of the complaints concerning the near-collapse of their stock were dismissed. However, U.S. District Judge Kent Dawson was also unsure that the shareholders could win their case against the large U.S. casino owner.
The Suits
Two suits were filed in 2010, which have since been combined, stating that Las Vegas Sands put forward incorrect predictions as to its prospects. The suits accuse the company of inflating the stock price just before it dropped.
The stock price fell from $144 in 2007 to $1.38 in early-2009, due to the fact that Las Vegas Sands had to deal with a liquidity crunch. This left shareholders with massive losses.
Information Withheld
The case against Las Vegas Sands states that it withheld certain information regarding its situation. For example, in 2007 and 2008, the company failed to admit that it was “facing a severe liquidity crisis that threatened to bring down the company because it lacked the cash and funding sources that would enable it to continue most of its multi-billion dollar ongoing or planned construction projects in the United States, Singapore and Macau.”
Instead of making shareholders aware of how serious the liquidity crisis was and tell the market that it would have to put a stop to many development projects ongoing in the United States and Macau, Las Vegas Sands gave an impression that everything was running smoothly and that funding was available for the ongoing construction, with no issues concerning future financing.
However, it then turned out that for a number of months Las Vegas Sands had been dealing with a liquidity crisis due to the fact that it had run out of money, which forced it to put a stop to many of the construction projects. In fact, to avoid complete bankruptcy it would require an emergency money infusion.
Situation of Shares
In its defense, Las Vegas Sands stated that it was the global credit crunch that started in 2007 that was responsible for the share price drop.
Thanks to the financial support from Adelson as well as good business in Singapore and Macau, shares have now risen to $43. Las Vegas Sands also reported that in the second quarter of 2011, it earned a profit of $367.6 million on net revenue of $2.35 billion, a 47 percent revenue increase from the 2010 quarter figure.
Although Dawson has expressed doubts, he is still allowing the charge to continue. “While the court has doubts about the ultimate viability of the allegations in the amended complaint, for the purposes of this motion to dismiss, the amended complaint sufficiently alleges false statements of material fact, or omissions of material fact that render other statements misleading,’’ he wrote in the order.
The majority of the case is still being upheld against Las Vegas Sands, and Dawson’s ruling puts the case on track for the discovery process. The shareholders’ attorney Spencer Burkholz explained that he was looking forward to presenting their case in the court.