HD Supply Holdings, Inc. (HDS) Accused of Touting Unattainable Growth Targets
Beginning in November 2016, HD Supply executives caused the company to issue false and misleading statements regarding operating leverage and supply chain corrective actions. Unbeknownst to investors, HD Supply’s Facilities Maintenance (“FM”) segment was experiencing supply chain deficiencies. Notwithstanding, company officials touted that its FM segment was on track and asserted positive projections and a drastic increase in HD Supply’s operating leverage for the second half of 2017. These positive statements caused HD Supply’s stock price to artificially increase.
While the price of the stock was inflated, HD Supply’s Chief Executive Officer Joseph J. DeAngelo disposed of over 1.3 million shares of his HD Supply stock – approximately 80% of his ownership in the company – for proceeds of nearly $54 million.
On June 6, 2017, HD Supply revealed first quarter 2017 earnings that missed analyst estimates and announced increased capital investments in its FM segment, which in turn forced the company to reduce its operating leverage targets for 2017. On this news, HD Supply’s stock fell $7.24 per share, or 17.5 %, to close at $34.03 per share on June 6, 2017, resulting in a loss of approximately $1.4 billion in market capitalization. The stock still trades at a reduced price.