A retirement fund representing firefighters and police in Waterford, Mich., is claiming in a lawsuit that Ply Gem Holdings Inc. misrepresented its financial performance in violation of federal securities laws.
The investment group alleges that the Cary, N.C.-based manufacturer of vinyl siding and other exterior building materials omitted required information from a registration statement leading up to its initial public offering last year.
On May 22, 2013, Ply Gem issued more than 18 million common shares to the public on the New York Stock Exchange for $21 each, raising net proceeds of $353.4 million. The shares are listed under the trade name PGEM, which hit a 52-week low of $10.63 and opened at $11.60 a share on the first anniversary of its initial public offering.
With Ply Gem shares trading at about half the IPO price, the Waterford Township Police and Fire Retirement System commenced a class action lawsuit in U.S. District Court in New York.
The complaint was filed May 19 on behalf of purchasers of the common stock that can be traced to the IPO. The law firm of Robbins Geller Rudman & Dowd LLP has until July 18 to seek other lead plaintiffs and make the case a class-action suit.
The complaint says certain Ply Gem officers, directors and underwriters of the IPO violated the Securities Act of 1933 by failing to disclose all risks and business changes known at the time of its registration statement. The omissions allegedly caused the financial information that was reported “not to be indicative of Ply Gem's future operating results.”
The complaint says the undisclosed information included: a new supply agreement with Home Depot that had an inventory take-back provision, labor inefficiencies, and ramp-up costs for a lower-price, lower-margin product to be initially sold by Home Depot.
“These known, but undisclosed, events had a material adverse effect on Ply Gem's operating results during its second quarter ended June 29, 2013,” according to a statement by the law firm representing the system for first responders retired from the Detroit suburb.
A Ply Gem spokeswoman could not be reached for comment.
In addition to vinyl siding and fencing, Ply Gem makes windows, patio doors and other kinds of siding and accessories for the professional and do-it-yourself construction and remodeling markets primarily in the United States and Canada.
Ply Gem ranks among the top pipe, profile and tubing extruders in North America. The company reported that net sales increased 4.8 percent to $269.5 million for the first three months of 2014 compared to the prior year. However, operating earnings showed a $19.6 million loss, which is a decrease of $19 million from the first quarter of 2013.
