On April 6, 2018, investors sued Colony NorthStar, Inc. (“Colony NorthStar” or the “Company”) in United States District Court, Central District of California. Plaintiffs in the federal securities class action allege that they acquired Colony NorthStar stock at artificially inflated prices between February 28, 2017 and March 1, 2018 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time. Here’s everything you need to know about the Colony Northstar class action lawsuit:

Summary of the Allegations

Company Background

According to the April 6 complaint, the Company (NYSE: CLNS) is a global real estate and investment management firm created through a “tri-party merger” between Colony Capital Inc., NorthStar Asset Management Group, Inc., and NorthStar Realty Finance Corp. on or around January 10, 2017.

It now engages in real estate transactions including but not limited to industrial properties; independent living, assisted living and skilled nursing facilities; and various hotels. It also provides investment management services to “a diverse set of institutional and individual investors.”

Summary of Facts

Colony NorthStar and four of its current and former officers/directors are now accused of deceiving investors by lying and withholding critical information about the Company’s business practices and performance during the Class Period.

Specifically, they are accused of omitting truthful information about the performance of its Healthcare and Investment Management Services divisions from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused the Company’s stock to trade at artificially inflated prices during the time in question.

The truth came out on March 1, 2018, when Colony NorthStar announced its financial results for the fourth quarter and full year ended December 31, 2017, on a form filed with the SEC. On it, the Company acknowledged a goodwill impairment of $375 million “attributable to the Company’s Investment Management segment.”

On a conference call held that day, the Company’s CEO, an individual defendant in the April 6 lawsuit, acknowledge that, “… our earnings performance has not lived up to expectations, emanating from more challenging industry conditions in healthcare, real estate as well as our retail broker dealer distribution business…”

A closer look…

As alleged in the April 6 complaint, the Company repeatedly made misleading public statements during the Class Period.

For instance, on a form filed with the SEC on May 10, 2017, the Company stated the following regarding its Healthcare division: “In connection with our on-going sales initiative, subsequent to the Merger, we closed on the sale of an 18.7% noncontrolling interest in our healthcare real estate portfolio through a newly formed joint venture for $350 million (including $20 million of certain pre-funded capital items). We act as the manager of our healthcare joint venture and are responsible for the day-to-day business and affairs of our healthcare portfolio.”

On the same form, Colony NorthStar stated the following regarding its Investment Management division: “For the three months ended March 31, 2017, we closed on approximately $980 million of third party capital commitments, with $940 million from institutional clients and $40 million from retail clients.”

Then, on another form filed with the SEC on August 9, 2017, the Company included the following statement regarding its Healthcare division: “Subsequent to the Merger, we old one medical office building for net proceeds of $3.1 million. At June 30, 2017, we had one portfolio, five medical office buildings and two skilled nursing facilities held for sale, with an aggregate real estate carrying value of $228 million and corresponding debt carrying value of $168.7 million.”

On the same form, the Company included the following statement regarding its Investment Management division: “For the six months ended June 30, 2017, we closed on approximately $1.4 billion of third party capital commitments, including our pro rata share from equity method investments in third party asset managers.”

Impact of the Alleged Fraud on Colony NorthStar’s Stock Price and Market Capitalization

The following chart illustrates the stock price during the class period:

Actions You May Take

If you have purchased shares during the Class Period, you may join the class action as a lead plaintiff, remain a passive class member, or opt out of this litigation and pursue individual claims that may not be available to the class as a whole.

NOTE: The deadline to file for lead plaintiff in this class action is June 5, 2018. You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court. Typically, the plaintiff or plaintiffs with the largest losses are appointed lead plaintiff.

In order to identify your potential exposure to the alleged fraud during the time in question, you may wish to perform an analysis of your transactions in Colony NorthStar common stock using court approved loss calculation methods.

Recently Filed Cases

Listed below are recently filed securities class action cases being monitored by us, along with the class period and the deadline to file a motion to be appointed as the Lead Plaintiff in the action.  Please contact us if you would like an LK report for any of these cases:

About Us

Levi & Korsinsky is a leading securities litigation firm with a hard-earned reputation for protecting investors’ rights and recovering losses arising from fraud, mismanagement and corporate abuse.  With thirty attorneys and offices in New York, Connecticut, California and Washington D.C., the firm is able to litigate cases in various jurisdictions in the U.S., England, and in other international jurisdictions.

Levi & Korsinsky provides portfolio monitoring services for high-net worth investors and institutional clients.  Our firm also assists investors in evaluating whether to opt-out of large securities class actions to pursue individual claims.

For additional information about this case or our institutional services, please contact us.