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Stamps.com has agreed to pay $30 million to investors to settle multiple class action lawsuits claiming it knowingly abused its relationship with the U.S. Postal Service (USPS), causing stocks to plummet when its alleged scheme was revealed.
In legal filings lodged Friday in Delaware Chancery Court, investors, Stamps.com, and multiple individual defendants told the court they’d reached a deal, Law360 reported.
They said defendants’ insurers would pay $30 million cash to the company for corporate reforms and “general corporate purposes.” Lawyers for the investors are asking for $6.9 million.
The deal seeks to put an end to claims that Stamps was reselling USPS products to small volume delivery companies, directly breaching the agreement it had with the U.S. Postal Service.
When the Postal Services learned about the scheme, it cut ties with Stamps, causing the company’s stock price to plummet.
The scheme, which allegedly began in 2011, officially fell apart on Dec. 21, 2018, when the USPS ended its agreement with the company, the lawsuit says.
Investors say they learned about the situation in Feb. 2019, which triggered a 58 percent stock price plummet, from $198 to $83.65 per share, Law360 reported.
USPS then announced it was reforming its reseller agreement due to the discovery, a move which would further hurt Stamps’ bottom line. This triggered a 56 percent stock price drop, to $36.90, investors say.
The lawsuit reportedly alleges insiders sold $190 million in corporate stock at prices that were artificially inflated by the company’s failure to inform investors about the real reason for the company’s growth, and the impact of USPS cutting ties.
“The parties recognize the time and expense that would be incurred by further litigation and the uncertainties inherent in this action and the Delaware federal action and wish to settle and resolve the derivative claims asserted by plaintiffs,” Friday’s court filing reportedly says.
Investors can often reach large settlements under securities laws.
Earlier this month, Allergan announced it will pay $130 million to end a class action lawsuit alleging it drove up drug prices by as much as 7,000 percent in an antitrust conspiracy and misled investors about its price-fixing activities.
What do you think of investors’ claims against Stamps.com? Let us know in the comments!
The investors are represented by David MacIsaac, John Vielandi, Mark Richardson, Ned Weinberger and Mark Richardson of Labaton Sucharow LLP, Guillaume Buell of Thornton Law Firm LLP, Daniel B. Rehns and Frank R. Schirripa of Hach Rose Schirripa & Cheverie LLP, Thomas J. McKenna and Gregory M. Egleston of Gainey McKenna & Egleston and Benjamin I. Sachs-Michaels and Daniella Quitt of Glancy Prongay & Murray LLP.
The Stamps.com Insider Trading Class Action Lawsuit is Macomb County Employees’ Retirement System v. Kenneth McBride et al., Case No. 2019-0658, in the Court of Chancery of the State of Delaware.
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