Advanta Corp. Hit By Shareholder Lawsuit
An investor in Advanta Corp. (Public, NASDAQ:ADVNB) filed a lawsuit in the United States District Court for the Eastern District of Pennsylvania on behalf of purchasers of Advanta Corp. (NASDAQ:ADVNA; NASDAQ:ADVNB) Class A and/or Class B common stock during the period between October 31, 2006 and November 27, 2007, against ADVANTA Corp. (NasdaqGS: ADVNB) and others over alleged violations of Federal Securities Laws.
According to the complaint the plaintiff alleges that Advanta Corp. (ADVNB) and certain of its officers and directors violated the Securities Exchange Act of 1934 by issuing between October 31, 2006 and November 27, 2007 materially false and misleading statements regarding the its business and financial results. Specifically, the complaint alleges that defendants engaged in improper behavior that harmed Advanta’s investors by failing to disclose the impact of the economic environment and the deteriorating credit trends on its business and that the Company failed to adequately and timely record losses for its impaired loans and customer delinquencies, causing its financial results to be materially false. Defendants also concealed the adverse effects the Company’s manipulations of its cash rewards program was having on its business. As a result of defendants’ false statements, Advanta’s stock traded at artificially inflated prices during the Class Period, reaching a high of $34.07 per share on June 19, 2007, so the lawsuit.
Then, on November 27, 2007, Advanta held a conference call with analysts and investors to discuss the Company’s business performance. Advanta announced that due to the volatility of the economy, guidance for 2008 would not be released. Additionally, since the release of the third quarter 2007 results on October 25, 2007, a higher percentage of customers had become delinquent on their credit card payments and a lower percentage of customers made payments, indicating a trend of charge-offs. After these disclosures, Advanta stock dropped, closing on November 27, 2007 at $11.06 per share, and falling to as low as $9.35 per share on November 28, 2007, a decline of 72% from Advanta’s Class Period high of $34.07 per share in June 2007.
Advanta Corp., Spring House, PA, issues business purpose credit cards to small businesses and business professionals in the United States. The Company's business credit card accounts provide approved customers with unsecured revolving business credit lines. Advanta Corp reported in 2007 Total Revenue of $562.14million with a Net income of $71.03million and in 2008 Total Revenue of $488.75million. Shares of Advanta Corp. (NASDAQ:ADVNB) recently traded at $0.504 per share, down from its 52weekHigh of $6.23 per share, $9.52 per share on September 09, $9.87 per share in May 09, $10.40 per share in February 09, and over $33 per share in 2007.