Johnson Fistel Helps Recover Millions for FTSI Shareholders Despite Company’s Bankruptcy Proceedings
— Johnson Fistel, LLP (@JF_LLP) April 20, 2021
On April 13, 2021, The Honorable Lee H. Rosenthal, U.S. District Judge for the U.S. District Court for the Southern District of Texas granted final approval of a $9.875 million settlement in Glock v. FTS International, Inc., et al., a class action alleging that FTSI International, Inc. (“FTSI” or the “Company”) and certain of its officers and directors, as well as underwriters of the Company’s February 5, 2018 initial public offering (the “IPO”), violated §§11 and 15 of the Securities Act of 1933 by issuing materially false and misleading statements and omissions in the Company’s IPO offering documents. The settlement class includes all persons who purchased FTSI common stock in or traceable to FTSI’s IPO, including all persons who purchased or acquired FTSI common stock on or after February 2, 2018.
The petition filed in the action alleges that FTSI, which is a provider of hydraulic fracturing services, misleadingly claimed that the Company was in the midst of an extraordinary turnaround at the time of the Company’s February 2018 IPO. For example, as the petition alleges, according to IPO offering documents, FTSI was experiencing “a surge in demand for [its] services” that had allowed the Company to raise prices “significantly” in 2017 and to reactivate ten fleets from its 2016 nadir. By the end of 2017, the petition alleges that FTSI claimed that it had 27 active fleets, and that this number would continue to increase in 2018 based on existing demand for FTSI’s services. For the first nine months of 2017, FTSI stated that its total revenues had increased 165% to over $1 billion as compared to approximately $380 million for the first nine months of 2016. A significant portion of this increase in revenues was attributable to services that FTSI had provided to defendant Chesapeake Energy.
The petition alleges that the IPO offering documents failed to disclose that market dynamics impacting FTSI had significantly deteriorated, that the Company’s dedicated contracts could be prematurely terminated by FTSI’s customers, and that the growth in revenues in the lead up to the IPO attributable to Chesapeake Energy would not be maintained. By February 13, 2019, the price of FTSI shares had fallen to $9.29 per share, nearly 50% below the price at which FTSI shares had been sold to investors in the IPO. Eventually, FTSI would file for bankruptcy protection, devastating shareholder value and the Company’s investors.
Johnson Fistel, along with co-counsel, engaged in over two years of hard-fought litigation against defendants, each of whom were represented by some of the largest and most prominent law firms in the country and who zealously utilized every procedural mechanism to thwart plaintiff’s claims. Indeed, the litigation bounced between Texas state trial and appellate courts, and then ultimately into federal bankruptcy and district courts, where the settlement was recently approved.
“This settlement is an outstanding result for FTSI shareholders considering the significant procedural hurdles we faced and was only achieved through the dedication and creativity of the lawyers on our team,” said Frank J. Johnson, Managing Partner of Johnson Fistel.
Johnson Fistel attorneys Frank J. Johnson, Michael I. Fistel, Jr., Brett M. Middleton, William W. Stone, and Reed F. Baker, serving as court-appointed co-lead counsel, led the prosecution of the litigation for the firm and helped achieve this superb result for investors.
Glock v. FTS International, Inc., et al., Civil Action No. 4:20-cv-03928 (S.D. Tx.)