HARTFORD, Conn., Feb. 23, 2007 (PRIME NEWSWIRE) -- The law firm of Schatz Nobel Izard, P.C., which has significant experience representing investors in prosecuting claims of securities fraud, announces that a lawsuit seeking class action status has been filed in the United States District Court for the Western District of Missouri on behalf of all persons who purchased or otherwise acquired the common stock of NovaStar Financial, Inc. ("NovaStar" or the "Company") (NYSE:NFI) between May 4, 2006 and February 20, 2007 inclusive, (the "Class Period").
The Complaint alleges that NovaStar and certain of its officers and directors violated Federal Securities laws. Specifically, defendants concealed the following facts: (i) NovaStar lacked requisite internal controls, and, as a result, the projections and reported results were based upon defective assumptions about loan delinquencies; (ii) NovaStar's financial statements were materially misstated due to its failure to properly account for its allowance for loan losses; (iii) given the deterioration and the increased volatility in the subprime market, NovaStar would be forced to tighten its underwriting guidelines which would have a direct material negative impact on its loan production going forward; and (iv) given the increased volatility in the lending market, NovaStar had no reasonable basis to make projections about its ability to maintain its Real Estate Investment Trust ("REIT") taxable income, which drives dividends, and potentially even its very status as a REIT. As a result, NovaStar's projections issued during the Class Period about its REIT taxable income and dividends were at a minimum reckless.
On February 20, 2007, after the markets closed, NovaStar announced disappointing fourth quarter and year-end 2006 results and further warned that it expected to earn little, if any, taxable income in the next five years. On this news, NovaStar's stock fell 42% to close at $10.10 per share on February 21, 2007.
If you are a member of the class, you may, no later than April 24, 2007, request that the Court appoint you as lead plaintiff of the class. A lead plaintiff is a class member that acts on behalf of other class members in directing the litigation. Although your ability to share in any recovery is not affected by the decision whether or not to seek appointment as a lead plaintiff, lead plaintiffs make important decisions which could affect the overall recovery for class members, including decisions concerning settlement. The securities laws require the Court to consider the class member(s) with the largest financial interest as presumptively the most adequate lead plaintiff(s).
While Schatz Nobel Izard, P.C. has not filed a lawsuit against the defendants, to view a copy of the Complaint initiating the class action or for more information about the case, class action cases in general, and your rights, please contact Schatz Nobel Izard, P.C. toll-free at (800) 797-5499, or by e-mail at firm@snlaw.net, or visit our website: www.snlaw.net.