CVR Refining, LP
The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the Southern District of New York on behalf of those who sold CVR Refining, LP (“CVRR” or the “Company”) (Other: CVRR) securities during the period from July 30, 2018 through January 28, 2019 (the “Class Period”). Investors have until June 5, 2020 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
CVRR, an independent downstream energy limited partnership, was formed by CVR Energy, Inc. (“CVI”). Since formation, CVRR’s business and operations have been run by its general partner, CVR Refining GP, LLC (the “General Partner”), which is indirectly owned by CVI. Prior to the start of the class period, CVI completed an exchange offer where it exchanged CVI shares for most, but not all, of the outstanding CVRR units (the “Exchange Offer”).
On July 30, 2018, the trading day following the expiration of the Exchange Offer, CVRR announced that the General Partner, CVI, and other affiliates now owned 84.5 percent of the outstanding CVRR common units, a sufficient amount to exercise the buyout provision in CVRR’s partnership agreement (the “Call Right”). Under the Call Right, the General Partner had the right to acquire all remaining CVRR units for the greater of: (i) the 20-day trading average three days prior to notice of intent to effect the buyout; or (ii) the highest per-unit price paid by the General Partner and/or affiliates for CVRR units during the 90-day period prior to notice of intent to effect the buyout. Despite the General Partner’s ability to exercise this right, Defendants stated on August 1, 2018, that there were “no current plans to exercise the call right.”
The lawsuit alleges that Defendants executed a fraudulent scheme to artificially depress the price of publicly traded CVRR units in order to acquire them for a substantial discount: (i) following the Exchange Offer, reduced public float and the threat of the Call Right began depressing the price of CVRR units, more than offsetting favorable financial results; (ii) as the price for CVRR units stagnated, and more than 90 days had passed since expiration of the Exchange Offer, Defendants announced that they were “considering” exercising the Call Right to further drive down the unit price; and (iii) once the price of CVRR units had substantially declined, Defendants exercised the Call Right, which price was based on the (manipulated) 20-day trading average of CVRR units.
On October 24, 2018, CVRR released its third quarter 2018 financial results, which results were up substantially from the year prior. What should have signaled lasting gains for CVRR, however, all but evaporated in a handful of trading days. This negative market sentiment reflected the reduced public float of CVRR units following the Exchange Offer, as well as the looming threat of the Call Right—despite assurances that there was “no intention” to exercise it.
The General Partner announced on November 29, 2018 it was now “considering” exercising the Call Right, and that neither it, nor any of its affiliates, had purchased CVRR units in the 90-day period predating the announcement, further driving down the CVRR unit price. Then, on January 17, 2019, CVRR issued a press release announcing the General Partner had assigned the Call Right to CVI, and that CVI would exercise the Call Right on January 29, 2019, “for a cash purchase price of $10.50 per Common Unit,” which price was based on the 20-day trading average of CVRR units ending on January 14, 2018.
To add a further layer to Defendants’ misconduct, an executive officer of the General Partner, CVI, and CVRR, and therefore an affiliate of the General Partner, had purchased CVRR units on November 14, 2018, at $16.71 per unit—well-within 90 days of CVI’s notice of intent to effect the buyout. This transaction, which was only disclosed on January 15, 2019, purportedly due to “administrative error,” was all but ignored by Defendants. Therefore, pursuant to the terms of the Call Right, the Call Price should have been at minimum, $16.71.
If you sold CVRR securities, have information, or would like to learn more about these claims, please contact Thomas W. Elrod of Kirby McInerney LLP at 212-371-6600, by email at firstname.lastname@example.org, or by filling out this contact form, to discuss your rights or interests with respect to these matters without any cost to you.