Retailer/cataloger Abercrombie & Fitch, Columbia, OH, is facing 10 class action suits alleging it tipped financial analysts Lazard Freres about soft sales growth five days before the announcement was made public.
The suits, representing people who bought shares between Oct. 8, when Abercrombie & Fitch may have leaked information to Lazard, and Oct. 12, when the announcement was made public, accused the marketer of “selective disclosure”–the practice of releasing important financial information to analysts with which a company is trying to build or maintain a relationship.
When Abercrombie & Fitch did announce its sales growth for the quarter ending Oct. 31 would be only 12%, its share value dropped by about a third–in excess of $1 billion (U.S.) in value.
The official figures for the quarter will be released Nov. 9. Abercrombie & Fitch expects to meet the predicted 31-cent-per-share dividend.
Neither Abercrombie & Fitch nor Lazard have commented on the suits or the situation. However, the marketer did mail a letter to its employees professing not to understand why the value of their stocks plummeted.
Selective disclosure is a controversial issue on Wall Street. Some experts in investment ethics argue that it’s tantamount to insider trading. Over the weekend, Securities and Exchange Commission chairman Arthur Levitt promised to crack down on the practice because it was dangerously close to illegal. New rules may be in effect in as little as six months.
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