A class action has been filed in the United States District Court for the Southern District of New York against Oklahoma-based SemGroup Energy Partners, L.P. (Nasdaq: SGLP). The Complaint alleges that SGLP's parent SemGroup, L.P. (the ``Parent'') was in financial difficulty or at high risk for such financial difficulty as a result of its investment in risky crude oil hedge transactions by the start of the class period, but hid this from investors in SGLP. Rather, on or about February 20, 2008, SGLP effected a secondary offering, (the ``Offering'') where it sold 6 million units at $23.90 for proceeds of $137 million. It also borrowed substantial funds and purchased the Parent's asphalt business for $387 million. It is alleged that this transaction was designed to financially prop up the Parent. While the Prospectus for the Offering described the positive relationship between SGLP and the Parent, and further described how important the Parent was to SGLP since it was SGLP's primary customer and provided almost all of the Company's revenue, there was no discussion of the Parent's financial difficulties or risk factors.
In the period following the Offering, SGLP units traded in the $24-27 range reflecting that, as far as the investing public was aware, the Company was operating according to its business plan. However, by July 11, 2008, SGLP unit values began to decline on increased trading volume, despite the release of no adverse news. Then on July 17, 2007 SGLP unit prices declined 50% to $11.00 on greatly increased volume of 5.7 million units, as a result of leakage of material adverse news which had been withheld by defendants. As a result of the widespread leakage, the defendants were finally forced to issue a statement after the market closed on July 17, 2008 revealing that the Parent was experiencing liquidity issues and was exploring various alternatives, including raising additional equity, debt capital or the filing of a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code.
This news, which was completely unexpected, shocked the market. As a result the price of the Company's units have continued to decline, wiping out almost $300 million in unitholder value.
If you are a current shareholder or purchased shares between February 20, 2008 through July 17, 2008 and would like to discuss your options of exercising your rights as a shareholder, please contact us.