Garrett Motion Inc. (GTXMQ) Misled Shareholders
Defendants failed to disclose to investors that Garrett’s agreement to indemnify and reimburse Honeywell for certain asbestos-related liability had saddled the Company with an unsustainable level of debt that posed significant challenges to the its strategic and financial flexibility and impaired its ability to gain or hold market share. On August 26, 2020, Garrett announced that its “leveraged capital structure poses significant challenges to its overall strategic and financial flexibility and may impair its ability to gain or hold market share in the highly competitive automotive supply market, thereby putting Garrett at a meaningful disadvantage relative to its peers.” Garrett pointed to “an inappropriate capital structure imposed by Honeywell on Garrett as part of its 2018 spin-off” as a contributing factor to its inability to “distribute value to its shareholders in the future.” On this news, Garrett’s share price fell over 44%. On September 20, 2020, Garrett announced it had filed for Chapter 11 bankruptcy. The next day, the NYSE announced it would commence proceedings to delist the Company’s stock. On this news, Garrett’s stock began trading over-the-counter and closed at $1.76 per share on September 22, 2020.