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In court documents filed this week, the lawyers argued that the settlement was "a good result" for the shareholders, "particularly in light of the risks of continuing to litigate this case and, in particular, the uncertainties related to NovaStar's difficult financial situation." Once one of the biggest subprime lenders in the country, NovaStar discontinued its lending and loan-servicing operations nearly two years ago after the subprime mortgage meltdown. Now it manages its portfolio of largely interest-only securities. The settlement, first announced in December, would resolve multiple lawsuits dating to 2004 and consolidated in federal court in Kansas City. The suits alleged that the company had made false and misleading public statements to artificially inflate its stock price. NovaStar is not admitting wrongdoing as part of the settlement, which covers purchasers of NovaStar's common stock or sellers of its put options between Oct. 29, 2003, and April 8, 2004. The lawsuits were filed shortly after The Wall Street Journal in April 2004 reported on licensing problems. The article triggered a huge sell-off of NovaStar stock, with shares plummeting nearly 31 percent before regaining 11.7 percent the next day. The lawsuits alleged that NovaStar failed to disclose its regulatory problems. To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com. Copyright (c) 2009, The Kansas City Star, Mo. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. For full details for NFI click here.
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