NEW YORK A shareholder class-action lawsuit has been filed against MaggieMoo’s parent NexCen Brands Inc. for allegedly violating securities laws in its $93.7 million acquisition of Great American Cookie Co., according to a statement from the plaintiffs’ legal counsel.
Radnor, Pa.-based Schiffrin Barroway Topaz & Kessler LLP asserts in the statement that NexCen had secured financing for the deal in part by agreeing to an accelerated-redemption provision. That stipulation in the lending agreement required NexCen to repay half of the amount it had borrowed by a particular date, the law firm said. When the provision was enacted, NexCen did not have the funds to meet its obligation and had to use cash on hand. That situation weakened its overall financial state, alleged Schiffrin Barroway.
The statement noted NexCen’s May 19 announcement that its viability as an ongoing concern was threatened by the financial crisis. After the disclosure of that and other details about the company’s financial health, NexCen’s stock price fell by more than 77 percent, to $1.95 per share, the law firm said.
Last Friday, NexCen announced that it had hired a financial adviser to explore a sale of its brands and other “strategic alternatives.” It also said at the time that it had cut 25 percent of its workforce in New York, where the company is based, and warned of further cost reductions.
Schiffrin Barroway said it filed the suit here in the U.S. District Court for the Southern District of New York to recover damages to investors who held purchased shares of NexCen this year between May 10 and May 19. The aggregate amount of those alleged damages was not disclosed.
An effort to reach NexCen for comment on the suit was not successful.
NexCen is a franchisor of five quick-service restaurant brands, in addition to The Athlete’s Food and Shoebox New York retail chains. In addition to the 300-unit Great American Cookie brand, its foodservice holdings include Marble Slab Creamery, Pretzel Time and Pretzel Maker.