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Textron Inc. is a global manufacturer and distributor of small aircrafts and recreational vehicles. On March 6, 2017, Textron expanded its recreational vehicle business through the $316 million acquisition of Arctic Cat, a company that designs and manufactures a variety of recreational vehicles including all-terrain vehicles and snowmobiles.
According to the action, Textron repeatedly touted Arctic Cat as an important growth business for the Company, reassuring investors about dealer demand, end market sales and earnings prospects for its Arctic Cat products. At the same time, however, Textron and the other defendants allegedly failed to disclose that (1) end market sales of Arctic Cat products were slowing, resulting in a massive glut of old Arctic Cat inventory on dealers’ floors, and (2) in order to clear out this old inventory, the Company provided significant price discounts, which negatively impact Textron’s earnings.
According to the action, the truth was revealed on October 18, 2018 when Textron reported weak third quarter 2018 earnings and cut its full-year 2018 forecast. Textron allegedly blamed the shortfall on heavy discounts that it had issued to clear out old inventory. Following this news, Textron’s stock fell $7.29 per share, or 11.25%, to close at $57.49 per share on October 18, 2018, erasing $1.8 billion from Textron's market capitalization.
On November 12, 2019, Kaplan Fox was appointed lead counsel. The court order appointing lead counsel dated November 13, 2019 can be found here.
On February 14, 2020, Lead Plaintiffs filed the Second Amended Complaint for Violation of the Federal Securities Law. A copy of the complaint can be viewed here .
On July 20, 2020, the district court dismissed the complaint for failure to adequately allege that defendants’ made a materially false and misleading statement. The district court’s decision can be viewed here. Lead Plaintiff appealed the decision to the United States Court of Appeals for the Second Circuit.
On September 17, 2021, the Second Circuit vacated the district court’s decision as to defendants’ inventory-related statements for further proceedings. The Second Circuit’s opinion can be viewed here .
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