Forterra Inc (NASDAQ:FRTA)
Investor’s sentiments on Forterra Inc (NASDAQ:FRTA) have turned sour in the wake of management admitting they were struggling to generate organic growth. Ever since, the company has evoked a wave of class action lawsuits from law firms, all of which are questioning whether the management team violated its fiduciary duties.
Forterra Sell Off
Forterra Inc (NASDAQ:FRTA)’s stock was yet again on the receiving end in Thursday’s trading session after rating firm, Moody’s downgraded the company rating to B3 from B1 on concern that its outlook remains negative. Investors reacted by sending the stock down 4.60% to end the day at $3.32.
Forterra Inc (NASDAQ:FRTA) is currently trading near its all-time lows having shed more than 80% in market value since the start of the year. The sell-off wave now threatens to push the stock to its 52-week low as it continues to trade on the lower end of its $3.31-$3.60 trading range.
Fuelling the current sell-off is the company’s admission that it did not generate any organic growth in the first six months of the year. Forterra Inc. (NASDAQ:FRTA) reported net sales of $338.3 million for the first quarter up from $187 million the prior quarter. The company attributes the increase to the impact of acquisitions rather than organic growth.
Moody’s concern about the company’s deteriorating operating results and credit metrics could continue to fuel the selloff wave given the risks at hand. The firm has also warned that the company’s credit profile could remain weak over the next 12 to 18 months.
“Forterra’s key credit metrics have deteriorated significantly over the last six months as debt increased and operating performance declined. The B3 corporate family rating (“CFR”) reflects our expectations for continued high debt leverage above 8.5x,” Moody’s rating in a statement.
Class Action Lawsuits
The negative outlook by Moody’s compounds Forterra Inc (NASDAQ:FRTA) woes in the market at a time when law firms are questioning its public statements. Law firms have lodged a class action investigation over claims the company failed to notify investors that its initiatives had failed to produce organic growth.
Also in question is whether Forterra Inc. (NASDAQ:FRTA) failed to notify investors that it was facing pricing pressures and operational problems at its plants. In addition, law firms are also investigating whether the company failed to disclose material weakness in internal controls relating to inventory accounting.
I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.
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About the author: James Marion is a University of Houston student studying Business with a concentration in Finance. James has interned with several investment professionals and hopes to pursue a career as a professional stock analyst after graduation.