Camping World and its chairman, investor Marcus Lemonis, are facing legal action from investors unhappy with the loss of millions of dollars linked to the acquisition of the Gander Mountain franchise.
Since the initial class action was lodged in federal court in Chicago on Oct. 19, several parties have asked Judge Rebecca Pallmeyer to appoint them as lead plaintiff in the matter, and their lawyers as lead class counsel.
David Ronge, the named plaintiff on the original complaint, owns Class A common stock in the Lincolnshire-based company that is one of the country’s leading retailers of recreational vehicles, trailers and outdoor supplies. He said Camping World artificially inflated stock prices and asked Pallmeyer to certify a class of shareholders who bought stock from March 8, 2017, to Aug. 7, 2018.
Robert Strougo filed a similar complaint Oct. 25, 2018, which Pallmeyer ultimately consolidated with Ronge’s action.
Also named as a defendant is Marcus Lemonis, Camping World’s majority owner, chairman and chief executive officer, along with private equity firm Crestview Partners II. The complaint said the defendants organized a $261 million October 2016 initial public offering before embarking on a series of strategic acquisitions, including the May 2017 purchases of assets of outdoors outfitter and sporting goods retailer Gander Mountain, which was in bankruptcy.
During the class period, according to the complaint, defendants oversold Camping World’s financial performance and disclosed material weaknesses in its financial reporting, “which contributed to the artificial inflation of Camping World’s reported 2016 basic earnings per share by over 37 percent,” a figure derived from a Feb. 27, 2018, Camping World release that addressed fiscal 2017 revisions that show 2016 EPS should’ve been 8 cents instead of 11 cents.
Camping World continued to report bad news throughout 2018, including a May report about earnings drops, disappointing sales figures compared to the industry average and, during one call, Lemonis “essentially admitted that new Gander store openings had been rushed due to his desire to open the stores as quickly as possible to boost revenues, despite encountering increased costs at the expense of profits,” according to the complaint. That information preceded a 17 percent drop in stock prices on May 8, 2018.
Two weeks later the company replaced its longtime auditor, setting off another 10 percent stock price drop, and an August report about ballooning long-term debt and another significant drop in expected earnings led to a 14 percent decline in stock price, closing at $19.04 on Aug. 8.
During the proposed class period, the complaint continued, “company insiders, including certain of the defendants, sold over $530 million worth of Camping World Class A shares at artificially inflated prices.”
On Dec. 18, several different retirement funds filed motions seeking to be named lead plaintiff. One joint motion included the City of Pontiac (Michigan) General Employees’ Retirement System and Oklahoma Police Pension & Retirement System, which proposed Robbins Geller Rudman & Dowd LLP, of San Diego and Chicago, to serve as lead counsel.
That firm, along with Johnston Fistel LLP, of Marietta, Ga., represented Ronge in his filing.
Another motion came from Memphis Light, Gas & Water Division Retirement and Pension System, which advanced Kessler Topaz Meltzer & Check LLP, of Radnor, Pa., as lead counsel, and Esbrook Law LLC, of Chicago, as liaison counsel.
The Memphis fund said it has the largest financial interest among class members, losses of nearly $380,000. But the Michigan and Oklahoma systems report total losses of more than $460,000.
In addition to class certification and a jury trial, Ronge’s initial complaint seeks damages and legal fees.