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Investigations  /  10.16.2019

Investigation of Textron Inc.

Textron Inc. (TXT) Accused of Misleading Shareholders 

According to the complaint, in March 2017, Textron acquired Artic Cat Inc. for $316 million on the notion that this acquisition would give Textron “a deeper product line for customers, greater potential for innovation, and introduces new sales opportunities for [Textron’s] worldwide dealer network.” Textron continued to tout this potential for growth throughout the class period, but failed to disclose that end market sales of Artic Cat products were actually slowing, creating a massive amount of old Artic Cat inventory on dealers’ floors. As a result of this inventory back-up, Textron provided significant price discounts, which negatively impacted Textron’s earnings. Then, on October 18, 2018, Textron reported weak third quarter 2018 earnings and cut its full-year 2018 forecast, attributing the poor financial results to the heavy discounts it issued in an effort to clear out old inventory. On this news, Textron stock fell $7.29, or 11.25%, to close at $57.49 and erasing $1.8 billion from its market capitalization. The stock value has yet to recover and continues to decline.

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