A class action lawsuit has been filed in the United States District Court for the Middle District of Tennessee on behalf of all persons or entities who purchased or otherwise acquired the stock of AgFeed Industries Inc. between March 16, 2009, and August 2, 2011, according to reports.

The complaint alleges that AgFeed made materially false and misleading statements regarding the company's financial health and in particular relating to its animal nutrition business. As a result, AgFeed's stock price traded at artificially inflated prices. In addition, the complaint alleges that the company failed to disclose to investors that:

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  • AgFeed's collection efforts and credit dealings with its animal nutrition customers were not working because the "formula based analysis" the company relied upon in determining accounts receivable and reserves for doubtful accounts was flawed;
  • allowances for doubtful accounts were materially undervalued;
  • accounts were overvalued and bad debts were undervalued, causing reported asset values to be overstated and expenses to be understated; and
  • AgFeed exaggerated its market edge as the combination of overstated assets and understated expenses resulted in creating an illusion of heightened profitability and failed to provide a "long-term picture" of AgFeed's value.