8-KOther Events

Monster Beverage Corp 8-K Report, Corporate Update (Sep 23, 2008)

Filed September 23, 2008For Securities:MNST

Summary

This 8-K filing by Hansen Natural Corporation (now Monster Beverage Corp.) on September 22, 2008, discloses the initiation of two federal securities class action lawsuits and one state derivative lawsuit against the company, its officers, and directors. The class actions, filed in the U.S. District Court for the Central District of California, allege violations of securities laws for making materially false and misleading statements between May 23, 2007, and November 8, 2007. Specifically, plaintiffs claim the company failed to disclose that second-quarter sales were inflated due to customers pre-purchasing products before price increases, that non-core drink lines were experiencing declining sales, and that there were production shortfalls with the Java Monster line. The derivative lawsuit, filed in the Superior Court of California, County of Riverside, purports to be brought on behalf of the company. It reiterates similar allegations of improper statements and further asserts that certain defendants sold company stock while possessing material non-public information about the company's true business prospects. The company maintains that these complaints are without merit and intends to defend itself vigorously against all legal actions.

Key Highlights

  • 1Two federal securities class action lawsuits were filed against Hansen Natural Corporation and its executives.
  • 2A state derivative lawsuit was filed against officers, directors, and employees, naming the company as a nominal defendant.
  • 3The class action complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.
  • 4Allegations include misleading statements about "inventory loading" prior to price increases on Monster and Java Monster drinks.
  • 5Plaintiffs claim the company failed to disclose declining sales in non-core drink lines and production shortfalls in Java Monster.
  • 6The derivative suit adds accusations of insider selling while in possession of material non-public information and breach of fiduciary duties.
  • 7Hansen Natural Corporation believes the complaints are without merit and intends to vigorously defend itself.

Frequently Asked Questions

The main allegations are that Hansen Natural Corporation made materially false and misleading statements between May 23, 2007, and November 8, 2007. Specifically, plaintiffs claim the company failed to disclose that second-quarter sales were boosted by customers buying products before price hikes, that non-core drink lines were seeing declining sales, and that there were production issues with the Java Monster line. These alleged misrepresentations are said to have lacked a reasonable basis for positive statements about the company's prospects.

The derivative lawsuit, filed on behalf of the company, reiterates similar allegations about misleading statements. It additionally claims that certain company insiders sold stock while possessing material non-public information about the company's true business conditions. The suit asserts claims for breach of fiduciary duty, insider selling, and other corporate governance-related issues, seeking damages and corporate governance reforms.

Hansen Natural Corporation believes that all the complaints are without merit and has stated its intention to vigorously defend itself against these legal actions.

The "Class Period" refers to the period during which the plaintiffs in the securities class action lawsuits claim to have purchased Hansen Natural Corporation stock and were allegedly harmed by the company's misleading statements. For these specific lawsuits, the Class Period is defined as May 23, 2007, through November 8, 2007.