A logo sign outside of a facility occupied by MGP Ingredients, Inc., also known as Midwest Grain Products, in Lawrenceburg, Indiana on July 2, 2017. (Photo: Kristoffer Tripplaar/Sipa via AP Images)
A proposed class action lawsuit filed against MGP Ingredients on Monday alleges that the whiskey giant misled investors in the years after COVID-19.
The complaint, filed by the Operating Engineers Construction Industry Miscellaneous Pension Fund, claims that the company unfairly capitalized on a boom and bust cycle to the detriment of investors. The onset of COVID-19 lockdowns prompted a surge in at-home spending on spirits, leading to profitable sales and stock gains for MGP as the company ramped up production. However, as demand began to wane in 2023, the lawsuit claims that MGP failed to inform investors of a "breathtaking" oversupply issue.
Between May 2023 and October 2024, MGP allegedly assured investors that its core business strategy remained strong. When the company finally admitted to soft demand and high inventories, MGP's stock price fell over 44% within a matter of weeks.
The industry giant produces dozens of brands including George Remus, Penelope and Rossville Union. MGP also owns a Distilling Solutions arm that helps produce spirits for myriad brands across the U.S., including Pinhook, Blue Run, Redemption, Smooth Ambler, Brother's Bond and TINCUP. The company is valued at a market cap of $1.02 billion as of Dec. 2.
"Throughout the Class Period, Defendants made materially false and/or misleading statements, and failed to disclose material adverse facts about the Company’s business, operations, and prospects," the filing alleges. "Specifically, Defendants repeatedly touted a strong demand and 'normal' inventory levels in brown goods (i.e., American whiskies and tequila), when in fact there had been a slowdown in consumption and oversupply in their products."
Skepticism of MGP's confidence allegedly began to emerge in a series of earnings calls earlier this year. During a question and answer session with investors, an analyst for Truist Securities reportedly told upper management:
“We’ve seen a slowdown in American whiskey consumption now for 12, almost 18 months. And so I guess the surprise factor is that you’re just realizing it, seeing it now.”
During that Q&A session, CFO Brandon M. Gall was quoted saying that MGP did "not expect new distillate sales to decline year-over-year." The lawsuit claims that market trends showed otherwise, amounting to either actual knowledge of wrongdoing or reckless disregard on behalf of the company. In addition to MGP, CEO David S. Bratcher, former CEO David Colo and CFO Gall are all named as individual defendants in the suit.
MGP has yet to make a public statement regarding the pension fund's lawsuit.
At least six law firms including including Robbins LLP, Bronstein, Gewirtz & Grossman LLC and Gainey McKenna & Egleston are now accepting claims for the proposed class action. Anyone who bought MGP stock between May 4, 2023, through Oct. 30, 2024, has until Feb. 4 to file a lead plaintiff motion.
[callout-app-promo]
