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UBS Faces Class Action Suit for Inadequate Exchange Ratio
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Since UBS Group AG’s (UBS - Free Report) emergency takeover of Credit Suisse, it has been facing legal hassles and operational challenges. Per a Reuters article, former shareholders of Credit Suisse have initiated a class action suit looking for a better deal from UBS with respect to its acquisition.
In March 2023, in government-backed efforts to fend off panic in the global banking system, UBS had agreed to acquire Credit Suisse in an all-stock deal valued at $3.2 billion. Following the acquisition, Credit Suisse shareholders received one UBS share for every 22.48 outstanding shares held.
The deal value was less than half of Credit Suisse’s market value calculated which was based on the last trading day before the deal closure.
LegalPass, a start-up providing legal services instituted a class action lawsuit for former Credit Suisse shareholders who have suffered damages due to an inappropriate exchange ratio. Since financial regulators had decided to withdraw shareholders’ voting rights regarding the acquisition, the only resort was to move to the court.
With this suit, LegalPass intends to pay the distressed shareholders a cash settlement equivalent to the difference between the deal value decided by the court and the price paid by UBS.
Ethos Foundation, that held more than 3% in Credit Suisse, decided to support LegalPass in its legal campaign. Ethos believes that the acquisition of Credit Suisse was forceful as it was conducted without the approval of its shareholders.
Apart from this class action lawsuit, UBS has been constantly facing challenges and legal claims regarding this deal. Earlier, as a result of this acquisition, Credit Suisse's additional tier 1 bonds were all written down to zero. Hence, such troubled bondholders’ have also been claiming compensation for their loss.
Further, a group of Credit Suisse’s bondholders have filed a lawsuit accusing former executives of the failed bank for its downfall.
The integration of Credit Suisse does not come without operational challenges. UBS and Credit Suisse have overlapping presence in the investment banking (IB) business, mostly in Australia and China. Hence, UBS is likely to cut IB jobs at Credit Suisse next month, specifically in the Asia-Pacific regionas part of the integration process.
Post acquisition, UBS had stated that it intended to save around $6 billion in staff costs. In fact, per a source, UBS informed its staff to expect three rounds of job cuts in the current year. The first round of cuts is most likely to take place by the end of July, with the other rounds tentatively planned for September and October.
Such eliminations of IB jobs by UBS are likely to reduce expenses and will help to navigate adverse market conditions causing pressure on top-line growth.
UBS Group AG’s shares have lost 0.5% on NYSE over the past six months against the industry’s growth of 6.1%.
Per the U.S. District Judge, Larry Alan Burns, Bank of America Corporation (BAC - Free Report) is likely to face a lawsuit due to its failure to respond to unauthorized transactions on unemployment and disability benefits cards in California in 2020. The news was reported by Reuters.
The San Diego judge asked the affected cardholders of BAC to move ahead with a proposed class action lawsuit against BofA, claiming that it violated state law by issuing cards to millions of people in California that lacked standard security measures.
Per the benefits recipients, the bank broke federal law by failing to investigate fraud claims or summarily freezing tens of thousands of accounts. The cardholders also claimed that BofA was unable to follow the Electronic Fund Transfer Act, which sets rules for banks to resolve account errors.
Wells Fargo & Company (WFC - Free Report) agreed to pay $1 billion related to a lawsuit accusing it of overstating the progress on resolving its 2016 fake account scandal and thereby defrauding shareholders. Since 2018, WFC has been under consent orders from the Federal Reserve and two other financial regulators to improve its governance and oversight.
But shareholders alleged that Wells Fargo and its past management misinformed them about how swiftly the company was addressing the governance issues and risk-management systems due to which the bank opened millions of fake accounts. Accordingly, when these shortcomings surfaced, WFC's market value fell by more than $54 billion over two years ending in March 2020.
However, Wells Fargo denied any wrongdoing and decided to settle to eliminate further litigation expenses.
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UBS Faces Class Action Suit for Inadequate Exchange Ratio
Since UBS Group AG’s (UBS - Free Report) emergency takeover of Credit Suisse, it has been facing legal hassles and operational challenges. Per a Reuters article, former shareholders of Credit Suisse have initiated a class action suit looking for a better deal from UBS with respect to its acquisition.
In March 2023, in government-backed efforts to fend off panic in the global banking system, UBS had agreed to acquire Credit Suisse in an all-stock deal valued at $3.2 billion. Following the acquisition, Credit Suisse shareholders received one UBS share for every 22.48 outstanding shares held.
The deal value was less than half of Credit Suisse’s market value calculated which was based on the last trading day before the deal closure.
LegalPass, a start-up providing legal services instituted a class action lawsuit for former Credit Suisse shareholders who have suffered damages due to an inappropriate exchange ratio. Since financial regulators had decided to withdraw shareholders’ voting rights regarding the acquisition, the only resort was to move to the court.
With this suit, LegalPass intends to pay the distressed shareholders a cash settlement equivalent to the difference between the deal value decided by the court and the price paid by UBS.
Ethos Foundation, that held more than 3% in Credit Suisse, decided to support LegalPass in its legal campaign. Ethos believes that the acquisition of Credit Suisse was forceful as it was conducted without the approval of its shareholders.
Apart from this class action lawsuit, UBS has been constantly facing challenges and legal claims regarding this deal. Earlier, as a result of this acquisition, Credit Suisse's additional tier 1 bonds were all written down to zero. Hence, such troubled bondholders’ have also been claiming compensation for their loss.
Further, a group of Credit Suisse’s bondholders have filed a lawsuit accusing former executives of the failed bank for its downfall.
The integration of Credit Suisse does not come without operational challenges. UBS and Credit Suisse have overlapping presence in the investment banking (IB) business, mostly in Australia and China. Hence, UBS is likely to cut IB jobs at Credit Suisse next month, specifically in the Asia-Pacific regionas part of the integration process.
Post acquisition, UBS had stated that it intended to save around $6 billion in staff costs. In fact, per a source, UBS informed its staff to expect three rounds of job cuts in the current year. The first round of cuts is most likely to take place by the end of July, with the other rounds tentatively planned for September and October.
Such eliminations of IB jobs by UBS are likely to reduce expenses and will help to navigate adverse market conditions causing pressure on top-line growth.
UBS Group AG’s shares have lost 0.5% on NYSE over the past six months against the industry’s growth of 6.1%.
Image Source: Zacks Investment Research
UBS carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Misconduct by Other Firms
Per the U.S. District Judge, Larry Alan Burns, Bank of America Corporation (BAC - Free Report) is likely to face a lawsuit due to its failure to respond to unauthorized transactions on unemployment and disability benefits cards in California in 2020. The news was reported by Reuters.
The San Diego judge asked the affected cardholders of BAC to move ahead with a proposed class action lawsuit against BofA, claiming that it violated state law by issuing cards to millions of people in California that lacked standard security measures.
Per the benefits recipients, the bank broke federal law by failing to investigate fraud claims or summarily freezing tens of thousands of accounts. The cardholders also claimed that BofA was unable to follow the Electronic Fund Transfer Act, which sets rules for banks to resolve account errors.
Wells Fargo & Company (WFC - Free Report) agreed to pay $1 billion related to a lawsuit accusing it of overstating the progress on resolving its 2016 fake account scandal and thereby defrauding shareholders. Since 2018, WFC has been under consent orders from the Federal Reserve and two other financial regulators to improve its governance and oversight.
But shareholders alleged that Wells Fargo and its past management misinformed them about how swiftly the company was addressing the governance issues and risk-management systems due to which the bank opened millions of fake accounts. Accordingly, when these shortcomings surfaced, WFC's market value fell by more than $54 billion over two years ending in March 2020.
However, Wells Fargo denied any wrongdoing and decided to settle to eliminate further litigation expenses.