PITTSBURGH – A lawsuit has been filed against natural gas company EQT Corp. by a retirement system for employees of Cambridge, Massachusetts, over allegations it deceived the investing public regarding the acquisition of a competitor.
Cambridge Retirement System sued EQT Corp. in the U.S. District Court for the Western District of Pennsylvania alleging it violated the Securities Exchange Act of 1934. The plaintiff filed the suit on behalf of itself and anyone else who bought common stock in EQT from June 19, 2017, to Oct. 24, 2018.
Cambridge alleges that on June 19, 2017, EQT revealed a deal to obtain competitor Rice Energy Inc. for total consideration of $6.7 billion. EQT allegedly said that because of this acquisition, there would be $2.5 billion in synergies and $100 million in savings for 2018 alone, along with a number of other alleged financial benefits.
But the next month, the suit states activist investor JANA Partners LLC said that it bought nearly 6 percent equity stake in EQT. JANA allegedly then distributed letters that said the synergies with the Rice merger were “grossly exaggerated” and that “it would be impossible for EQT to support its claimed synergy drilling plan” because there’s “simply not enough undrilled contiguous acreage blocks to enable such a dramatic improvement in lateral length,” according to the lawsuit.
JANA added that the synergy benefits EQT claimed were “blatantly deceptive,” the suit states.
EQT allegedly denied these claims, but in March 2018, five months after the acquisition was finalized, EQT announced the resignation of its CEO. In October 2018, EQT then revealed bad third-quarter financial results due to an increase in costs, which totaled $586.2 million more than the third quarter in 2017, the suit states.
EQT’s shares then dropped 13 percent from $40.46 per share to $35.34 per share on Oct. 24, 2018, “erasing nearly $700 million in shareholder value in a single day,” the plaintiff alleges. EQT shares then dropped to $31 a share a few days later, which was less than half of the company’s worth when the acquisition first happened.
Cambridge is seeking relief in the form of compensatory damages for itself and other class members, attorneys’ fees and other relief the court sees proper. It also demanded a trial by jury. It is represented by Janet Burkhardt and other attorneys with Weiss Burkardt Kramer in Pittsburgh and lawyers from Bernstein Litowitz Berger and Grossman in New York City.
U.S. District Court for the Western District of Pennsylvania case number 2:19-cv-00754