In Re: Tyson Foods, Inc. Securities Litigation

Court: United States District Court, Western District of Arkansas (Fayetteville)
Case Number: 5:16-cv-05340
Judge: Hon. Timothy L. Brooks
Class Period: 11/23/2015 - 11/18/2016
Case Contacts: John Rizio-Hamilton, Scott R. Foglietta, Angus Fei Ni 倪非

This is a securities class action on behalf of a class of investors who purchased or acquired the securities of Tyson Foods, Inc. (“Tyson or Company”) between November 23, 2015 and November 18, 2016 (the “Class Period”).  Defendants include Tyson and certain of its senior executives (collectively, “Defendants”).

Based in Springdale, Arkansas, Tyson is one of the largest food companies in the U.S. and a market leader in chicken, beef, and pork production.  The Company operates a vertically integrated chicken production process consisting of breeding stock, contract growers, feed production, processing, marketing, and transportation of chicken and related products, including animal and pet food ingredients.  Tyson is also one of the largest poultry breeding stock suppliers in the world.  In fiscal year 2015, Tyson’s domestic chicken operations accounted for 27.5% of its total sales and 63% of its operating income—making its chicken business the Company’s most important segment.

The action alleges that, throughout the Class Period, Defendants engaged in a scheme to defraud investors and made numerous materially false and misleading statements and omissions regarding Tyson’s business and operations.  Specifically, the Company misrepresented that Tyson’s products, including chicken, compete against other suppliers on price and other variables and falsely described the markets in which the Company sells chicken as “intensely competitive.”  Defendants also misrepresented the driver of Tyson’s strong margins in the sale of chickens.  As a result of these misrepresentations, Tyson stock traded at artificially inflated prices throughout the Class Period.

On October 7, 2016, Pivotal Research Group (“Pivotal”) issued a sell rating for Tyson and cut its price target for the Company’s shares by 60%. Pivotal cited the “powerfully convincing” allegations contained in an earlier-filed antitrust class action complaint that detailed a large price-fixing conspiracy by Tyson and other chicken producers. In its report, Pivotal provided investors with a detailed analysis of how collusion would explain Tyson’s favorable financial results over the preceding several years. Pivotal also observed that it had “long wondered how an industry marked by such volatility and lack of discipline, could morph to a highly disciplined industry where production remains constrained and pricing remains high.”  Finally, Pivotal noted that the Company’s participation in the price-fixing conspiracy would explain “why Tyson can offer EPS guidance with remarkable precision; boasting of margins at record levels well into the future” while “[t]he Tyson of old did not provide guidance.”  As a result of the Pivotal analysis, the price of Tyson shares declined by $6.63 per share, or 9%.

The weight of these allegations of antitrust collusion were confirmed on November 21, 2016, when Tyson announced that defendant Donald J. (Donnie) Smith, who had served as Tyson’s Chief Executive Officer since November 2009, was unexpectedly resigning.  The Company also announced that its chicken operations had sharply underperformed expectations for the fourth quarter of 2016.  While Tyson denied that Smith’s abrupt resignation was caused by the alleged antitrust conduct, analysts questioned the timing of his resignation during the litigation.  As a result of these disclosures, Tyson shares declined by $9.76 per share, or over 14%.

On January 25, 2017, BLB&G clients Employees’ Retirement System of Hawaii and Blue Sky Group were appointed as Lead Plaintiffs.

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