By the end of 2005, my shares had lost about half their value. I finally decided to sell and take the loss at that point, since I had some capital gains I could offset that year. I had a feeling that KKD was not going to recover for many years, if at all; taking the loss seemed about the best use I could make of the shares. And indeed they have yet to recover, as you can see by the Krispy Kreme stock chart.
I guess the story's not over. I got a thick packet in the mail this week from Krispy Kreme Securities Litigation, regarding the ongoing class action lawsuit on behalf of stockholders against the management. Here are some choice excerpts:
2. What is This Lawsuit About?(In the words of George Costanza - "Was that wrong? Should I not have done that?")
This case was brought as a class action alleging that the Class Settling Defendants manipulated and overstated Krispy Kreme's financial results by disguising debts as income and making other improper accounting adjustments, resulting in the artificial inflation of the price of Krispy Kreme securities between March 8, 2001 and April 18, 2005. Class Settling Defendants deny that they did anything wrong.
Settlement Fund: $75,000,000 in cash... Depending on the number and type of eligible securities that participate in the settlement and when those securities were purchased and sold, the estimated average recovery per share of common stock will be worth approximately $0.33 before the deduction of Court-approved fees and expenses...At $0.33 per share, it is not worth my time to participate in the class action. But after reading through the details, it looks like my shares could be worth more. I'll have to read through the papers a little more to figure it out. And I wonder what happens if I do get some piece of the settlement - how is that treated for tax purposes?
Cases like this make index funds very appealing in comparison to stock picking.
4 comments:
I rec'd the same packet and mailed it in. I have not heard back from them. Do you have a phone number to contact them handy? I'd like to call them and find out where my claim stands. Thanks.
The paperwork says you can call 619-231-1058. You can also check in at their site: http://www.gilardi.com.
How did you make out, or did you learn any more about the payouts? I never did file a claim but have been wondering if the payout was greater than the $0.33 per share. Thanks for any info.
After investigating it further, I decided that participating in the class action would not be worth the hassle. You can view the proposed settlement [pdf] - skip to page 4 which gives you a pretty clear idea how much money you would have gotten.
My part of the settlement would probably have been a few hundred dollars. But then I would have had to pay an accountant to do my tax returns and amended returns for tax year 2004, because I don't know how this situation should be treated. I suspect that the losses that I recorded in 2004 would need to be redone, which would mean I'd end up owing more tax for that year - no idea how much - which would perhaps result in penalties. I'm pretty sure just the fee for the accountant would wipe out most or all of the recovery that I'd get. In addition, I just didn't have a lot of free time to worry with it. So I washed my hands of it.
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