NEW YORK, March 9, 2007 (PRIME NEWSWIRE) -- A class action lawsuit was filed in the United States District Court for the Western District of Missouri against NovaStar Financial, Inc. (NYSE:NFI) ("NovaStar" or "the Company" ) on behalf of those who purchased NovaStar stock during the period from May 4, 2006 through February 20, 2007 inclusive (the "Class Period'"). A copy of the complaint may be obtained by visiting the Harwood Feffer website at http://www.hfesq.com .
The complaint alleges violations of federal securities laws, Sections 10(b) and (20)a of the Securities Exchange Act of 1934 and Rule 10b-5, including allegations of issuing a series of material misrepresentations to the market which had the effect of artificially inflating the market price.
On February 20, 2007, NovaStar shocked the market by announcing fourth quarter and year-end 2006 results and warned that NovaStar was expecting to earn little or no taxable income in the next five years. As a result of this announcement, on February 21, 2007 NovaStar's shares declined from $17.56 per share at the close of trading on February 20, 2007, to close at $10.10 per share, a one-day decline of approximately 42%, on heavier than usual volume. Additionally, it was discovered defendants knew or recklessly disregarded: (i) that NovaStar lacked adequate internal controls, and, as a result, the its guidelines and appraisal review process were inadequate to gauge the risk involved in the Company's lending practices; (ii) that the NovaStar's financial statements were materially false and misleading due to its failure to properly account for its allowance for loan losses; (iii) that due to the deterioration of the credit performance of the Company's portfolio, the Company would be forced to: a) record impairments on mortgage securities and additional loan provisions; and b) to repurchase a greater level of loans due to defaults; and (iv) that, as a result of the adverse conditions set forth above, NovaStar could not reasonably expect to report taxable income for the period 2007 through 2011, thus endangering the Company's dividend and continued status as a REIT.
If you purchased NovaStar stock during the Class Period, you may qualify to serve as Lead Plaintiff on behalf of the Class, which consists of all persons and entities who purchased NovaStar stock within the Class Period. You are not required to have sold your NovaStar stock in order to claim damages, or to serve in this role. All motions for appointment as Lead Plaintiff must be filed with the Court by April 24, 2007.
Harwood Feffer has taken a leading role in many important actions on behalf of defrauded shareholders, employee investors and consumers and is responsible for hundreds of millions of dollars in recoveries. The Harwood Feffer website contains detailed information regarding this matter and additional information about the firm. If you wish to discuss this action with us, or have any questions concerning this notice or your rights and interests with regards to the case, please contact:
Craig Lowther (clowther@hfesq.com) Harwood Feffer LLP Shareholder Relations Dept. 488 Madison Avenue, 8th Floor New York, New York 10022 Toll Free Telephone: (877) 935-7400 http://www.hfesq.com
More information on this and other class actions can be found on the Class Action Newsline at www.primenewswire.com/ca.