RegulationAugust 27, 2019

Anheuser-Busch InBev Hit with Shareholder Class Action Suit

Suit alleges brewer made false and misleading statements about financial condition.

Reported by Michael Katz

Brewing giant Anheuser-Busch InBev, and certain of its executives, has been hit with a class action lawsuit on behalf of shareholders who purchased the company’s stock from March 1, 2018, through Oct. 24, 2018. The complaint alleges that the company made false and misleading statements regarding its financial reporting during that time period.

The lawsuit was filed in the US District Court for the Southern District of New York on behalf of the City of Sterling Heights General Employees’ Retirement System. The case is centered on whether Anheuser-Busch InBev and its executives violated federal securities laws by allegedly failing to disclose adverse information regarding its business, operations, and prospects.

The plaintiffs say the company “deceived the investing public regarding Anheuser-Busch’s business, operations, liquidity, markets, deleveraging efforts, management, and present and future business prospects, and the intrinsic value of Anheuser-Busch ADS.”

The complaint alleges that the company made false and misleading statements and failed to disclose that its cost-cutting measures “had largely run their course,” and that the devaluation of key emerging market currencies and input cost inflation was having an adverse effect on the company’s margins, EBITDA, and profitability.

The plaintiffs also said that Anheuser-Busch had been experiencing lower-than-expected growth and profits in certain key markets, and that it was not going to be able to maintain its dividend at the time and still meet its deleveraging targets. Additionally, the complaint said Anheuser-Busch was at risk of having its credit ratings downgraded.

As a result of the alleged materially false and misleading statements “Anheuser-Busch ADS traded at artificially inflated prices during the class period,” said the complaint. “Plaintiff and other members of the class purchased Anheuser-Busch ADS relying upon the integrity of the market price of Anheuser-Busch ADS and market information relating to Anheuser-Busch, and have been damaged thereby.”

On Oct. 25, 2018, the company reported its financial results for the quarter ended Sept. 30, and announced that it had cut its dividend by 50% to “accelerate deleveraging.” Following the news, Anheuser-Busch InBev’s share price fell to $74.54 from $82.25 the previous day—a drop of 9.37%.

“When the truth about the company was revealed to the market, the price of Anheuser-Busch ADS fell significantly,” said the complaint. “The decline in the price of Anheuser-Busch ADS as the corrective disclosure came to light were a direct result of the nature and extent of defendants’ fraudulent misrepresentations being revealed to investors and the market.”