After a botched $172.5 million initial public offering, CPI Card Group Inc. shareholders will receive an $11 million cash settlement, according to a proposed settlement reached on December 31. The shareholders alleged that CPI oversold its chip-enabled credit cards ahead of its IPO.
The shareholders claimed that CPI shipped more than 100 million extra cards to its customers before its October 2015 IPO without telling investors. As an alleged result of the bloated inventory at financial institutions, stock prices dropped from $10 per share to $4.70 a share when the suit was filed in June 2016. In their suit, the shareholders claimed that the registration statement and prospectus used for CPI’s IPO were false and misleading for representing the true state of demand for the cards, as well as failing to disclose significant risks.
The proposed settlement followed a September denial of class certification.
CPI produces 35 percent of all payment cards in the United States and serves top U.S. debit and credit card issuers, including JPMorgan Chase, American Express, Bank of America, and Wells Fargo.
According to the terms of the settlement, funds will be distributed to class members based on their “recognized loss” as calculated by a federal statutory formula for damages.