Investor Suit Filed Against World's Leading Rig Operator
The class-action law firm Pomerantz has launched a suit against rig operator Valaris (formerly EnscoRowan), alleging that it misled investors about the risks it faces in the offshore E&P market.
Valaris was formed through the combination of Ensco and Rowan Drilling on April 11, 2019, and it is now the world's largest offshore rig operator. The firm's share price fell from $8 to less than $4 in the days after it issued its first-ever quarterly earnings report as a combined company on July 31. It booked a loss of $1.32 per share in the second quarter, more than the firms' comparable figures from 2018.
Pomerantz alleges that the company misled investors by failing to disclose the state of the ultra-deepwater market segment, the rate of its cash usage and its negative cash flow. Further, the lawsuit contends that the merger that created Valaris could not deliver on the advertised benefits.
Valaris noted in its second quarter statement that in the floater segment, it believes that either a supply reduction or a demand increase will be required to improve day rates and utilization. It noted that nearly all of the world fleet's freshly-delivered new floaters are uncontracted, another 10 are due for delivery this year, and 20 more are under construction for the years ahead (though some may be delayed or canceled).
The suit is open to anyone who bought shares of Valaris between April 11 and July 31, the period between when Valaris was formed and when it issued its second-quarter earnings statement. The Louisiana law firm of Kahn Swick & Foti has also announced a similar class-action suit against Valaris.
The law firm Pomerantz may be best known for winning a $3 billion class action lawsuit against Brazilian oil major Petrobras on behalf of a group of institutional investors. According to the firm, this was the largest securities class action settlement in a decade and the fifth-largest class action settlement of any kind ever achieved in the United States.