Uniti Group (UNIT) Improper Spin-Off, Misleading Info Securities Class Action

Publicly-held companies—those who sell their stock to the general public—are required to make regular reports on those companies and to disseminate only truthful information about their practices, finances, condition, and other matters. The complaint for this class action alleges that Uniti Group and its CEO and CFO  

The class for this action is all investors who bought or otherwise acquired Uniti securities on the public market between April 20, 2015 and February 15, 2019 and were damaged.

Uniti, originally known as Communications Sales & Leasing, Inc. (CS&L), was spun off from Windstream Holdings, Inc., to become a separate company in March 2015. At that point, Windstream became its main customer. Uniti now calls itself a real estate investment trust which the complaint says specializes “in acquisition and construction of essential-to-survival infrastructure in the communications industry.”

Just days after the spinoff, Uniti began trading on the NasdaqGS. In a previously-filed Information Statement, the company said in part, “CS&L will be an independent, publicly traded real estate investment trust that will own, acquire and lease distributions in the communications infrastructure industry and potentially other industries. We will strive to be a significant provider of capital and financing to the communication industry.”

The Statement went on to describe its “initial properties,” including tens of thousands of miles of fiber optic cable lines and over 200,000 miles of copper cable lines, plus land and buildings that were formerly owned by Windstream. “This distribution system will be leased to Windstream Holdings on a long-term, triple-net basis. We expect to diversify our tenant base in the future by acquiring additional properties and leasing them to other local, regional and national telecommunications providers.”

The complaint quotes three paragraphs of the Statement, including the above, and then alleges that the statements were materially false and/or misleading, because Uniti’s financial results were not sustainable, and the company knew it. Why? Because Windstream, its major customer, had defaulted on its unsecured notes.

In September 2017, Aurelius Capital Master, Ltd., which held more than 25% of Windstream’s unsecured notes due in 2023, gave notice to Windstream that, as the complaint puts it, “the sale and leaseback of Uniti constituted a sale and leaseback in breach of the notes’ indenture.” On February 15, 2019, the court agreed, and awarded Aurelius more than $310,000,000 plus interest.

At the news, Uniti’s stock fell from $19.98 to $12.51 over a period of four days, a drop of more than 37%.

The complaint alleges that Uniti and its officers knew that the company was not on firm ground and that its value would decline sharply when the truth was revealed.

According to the complaint, Uniti violated the Securities Exchange Act of 1934, by putting out false or misleading information and its officers violated it by signing off on that information.

Article Type: Lawsuit
Topic: Securities

Most Recent Case Event

Uniti Group (UNIT) Improper Spin-Off, Misleading Info Securities Class Action

October 25, 2019

Publicly-held companies—those who sell their stock to the general public—are required to make regular reports on those companies and to disseminate only truthful information about their practices, finances, condition, and other matters. The complaint for this class action alleges that Uniti Group and its CEO and CFO  

uniti_group_securities_complaint.pdf

Case Event History

Uniti Group (UNIT) Improper Spin-Off, Misleading Info Securities Class Action

October 25, 2019

Publicly-held companies—those who sell their stock to the general public—are required to make regular reports on those companies and to disseminate only truthful information about their practices, finances, condition, and other matters. The complaint for this class action alleges that Uniti Group and its CEO and CFO  

uniti_group_securities_complaint.pdf
Tags: False or Misleading Information, Securities