City of Riviera Beach General Employees Retirement System et al. v Macquarie Infrastructure Corporation et al.

Court: United States District Court for the Southern District of New York
Case Number: 1:18-cv-03608-VSB
Class Period: 02/22/2016 - 02/21/2018
Case Contacts: Salvatore J. Graziano, Lauren McMillen Ormsbee, Jesse L. Jensen, James M. Fee

This is a securities class action lawsuit on behalf of a class of persons and entities who purchased or acquired Macquarie Infrastructure Corporation (“Macquarie” or the “Company”) securities between February 22, 2016 and February 21, 2018, inclusive (the “Class Period”), against Macquarie, and certain of the Company's senior executives (collectively, “Defendants”). 

The action asserts claims that Defendants’ materially false and misleading statements caused substantial losses to the investor class under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b) and 78t(a), and SEC Rule 10b-5 promulgated thereunder.

This matter arises from Defendants’ misrepresentations and material omissions concerning Macquarie’s International-Matex Tank Terminals (“IMTT”) business and the sustainability of the Company’s dividend to shareholders. IMTT, which provides bulk liquid storage and handling services at 12 marine terminals in the United States and Canada, is Macquarie’s most important business segment.

Plaintiffs allege that throughout the Class Period, the Company emphasized IMTT’s “very strong” performance and “high” utilization rates at multiple investor conferences. Significantly, the Company only disclosed to investors the categories of commodities serviced by IMTT (such as chemicals, biofuels, vegetable and animal oils, crude and asphalt, and refined petroleum products), but did not disclose to investors the specific products stored at IMTT’s facilities. This made it impossible for investors to independently determine how industrywide changes in commodities demand and usage might impact IMTT’s liquid fuel storage business.

In particular, the Company never disclosed to investors IMTT’s dependence on heavy residual oils, and specifically No. 6 fuel oil, also known as “bunker” fuel.   No. 6 fuel oil is a heavy, viscous oil at the bottom of the distillation stream; it is the residual product that remains after the more valuable light oil products have been distilled from crude oil. For years prior to the start of the Class Period, use of No. 6 fuel oil had been in decline. Environmental concerns spurred regulations that promised to further curb use of such fuel oils.  Development of alternative fuel sources, such as shale oil, also have made No. 6 fuel oil less cost-effective than alternatives.

The decline in the usage of heavy residual oil products, including No. 6 fuel oil, presented a material risk to the Company, which Defendants concealed from investors. In addition to the risk of losing business and falling IMTT utilization rates, such widespread changes in the use of No. 6 fuel oil required Macquarie to repurpose its storage tanks to accommodate other commodities. However, the Company downplayed its exposure to fluctuations in the use of petroleum products, assuring investors that IMTT had “no commodity exposure directly” because it “simply provides access to storage capacity.”

Macquarie also falsely assured investors regarding the sustainability of the Company’s historically high dividend. Macquarie has for years been known as a high dividend-paying stock. For example, in early 2017, analysts named Macquarie a “Top Dividend Stock,” noting the Company’s strong quarterly dividend history, diversified business operations, and favorable long-term, multi-year growth rates. Indeed, over the past five years Macquarie has consistently paid quarterly dividends of more than 5%, and, throughout the Class Period has paid dividends of at least 6.7% or more. At the close of 2017, the Company’s annualized dividend yield exceeded 15%. As late as December 2017, Macquarie executives described the Company’s dividend as “sacrosanct.”  

On February 21, 2018, after the close of trading, Macquarie surprised the market by announcing disappointing fourth quarter earnings of $0.43 per share, well short of analysts’ estimate of $0.51 per share, and that the Company would be slashing its dividend by 31%. Macquarie blamed its poor performance on the declining use of heavy residual oil products, in particular, declining demand and prices for No. 6 fuel oil. In response to this news, Macquarie’s stock price fell from $63.62 per share on February 21, 2018, to $37.41 per share on February 22, 2018.

As a result of Defendants’ wrongful acts and omissions, and the resulting decline in the market value of Macquarie’s stock, Plaintiff and other Class members have suffered significant losses and damages.

On January 30, 2019, the Court appointed Moab Capital Partners, L.P., as Lead Plaintiff, and BLB&G as Lead Counsel, for the Class, while setting a deadline of March 1, 2019 for filing the consolidated amended class action complaint. To preserve the timeliness of certain claims under the Securities Act, Plaintiff filed the consolidated amended class action complaint earlier, on February 20, 2019. On April 22, 2019, Defendants moved to dismiss the case. On June 21, Plaintiff submitted an omnibus opposition in response to both motions to dismiss. No oral argument has yet been scheduled.

 

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