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UBS to Face Another Lawsuit for Inadequate Consideration
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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 Financial Times article, individual shareholders and former employees of Credit Suisse are expected to lodge a claim in Zurich’s commercial court.
The claim is likely to be filed by the Swiss Investor Protection Association on behalf of around 500 retail investors who have suffered losses due to the transaction.
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.
Earlier, UBS faced a class action suit by former shareholders of Credit Suisse who 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.
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.
Apart from these lawsuits, 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.
Nonetheless, UBS has been making progress on its integration of Credit Suisse. Last week, UBS announced the voluntary termination of its Loss Protection Agreement and Public Liquidity Backstop, which were offered by the Swiss government on the acquisition of Credit Suisse. Additionally, in an attempt to restore financial stability, the Emergency Liquidity Assistance Plus (ELA+) loan was fully repaid by Credit Suisse as of Aug 10, 2023.
UBS Group AG’s shares have gained 5.8% on NYSE over the past six months compared with the industry’s growth of 0.4%.
Bank of America (BAC - Free Report) has been hit with substantial financial penalties that amount to $250 million. This includes $100 million in customer reimbursements and $150 million in fines due to a trio of unsavory practices involving overdraft fees, withholding credit card rewards and opening unauthorized accounts.
Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) have levied this colossal fine after BAC's actions were deemed illegal and a detriment to customer trust. The bank must refund $100 million to affected customers and pay $90 million to CFPB and $60 million to OCC.
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 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 to Face Another Lawsuit for Inadequate Consideration
Since UBS Group AG’s (UBS - Free Report) emergency takeover of Credit Suisse, it has been facing legal hassles and operational challenges. Per a Financial Times article, individual shareholders and former employees of Credit Suisse are expected to lodge a claim in Zurich’s commercial court.
The claim is likely to be filed by the Swiss Investor Protection Association on behalf of around 500 retail investors who have suffered losses due to the transaction.
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.
Earlier, UBS faced a class action suit by former shareholders of Credit Suisse who 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.
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.
Apart from these lawsuits, 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.
Nonetheless, UBS has been making progress on its integration of Credit Suisse. Last week, UBS announced the voluntary termination of its Loss Protection Agreement and Public Liquidity Backstop, which were offered by the Swiss government on the acquisition of Credit Suisse. Additionally, in an attempt to restore financial stability, the Emergency Liquidity Assistance Plus (ELA+) loan was fully repaid by Credit Suisse as of Aug 10, 2023.
UBS Group AG’s shares have gained 5.8% on NYSE over the past six months compared with the industry’s growth of 0.4%.
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
Bank of America (BAC - Free Report) has been hit with substantial financial penalties that amount to $250 million. This includes $100 million in customer reimbursements and $150 million in fines due to a trio of unsavory practices involving overdraft fees, withholding credit card rewards and opening unauthorized accounts.
Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) have levied this colossal fine after BAC's actions were deemed illegal and a detriment to customer trust. The bank must refund $100 million to affected customers and pay $90 million to CFPB and $60 million to OCC.
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 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.