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Here's Why Tyson Foods (TSN) Stock Fell Today

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Shares of Tyson Foods (TSN - Free Report) , the largest processor of meat in the U.S., fell about 8.9% Friday after a brokerage firm said that a class action lawsuit against the company over price manipulation was “powerfully convincing.”

The lawsuit claims that Tyson, Koch Foods, and several other major players in the chicken processing business colluded to reduce production over the past several years. Other companies implicated in the lawsuit, including Pilgrim’s Pride (PPC - Free Report) and Sanderson Farms (SAFM - Free Report) were also down on Friday.

Today’s price action comes as Pivotal Research Group downgraded Tyson stock to “sell” from “buy” and cut its price target to $40 from $100. The bearish shift comes as the firm claims that the class action lawsuit may just be a serious problem for Tyson.

“Our thesis is that the class-action suit has merit and will lead to intense scrutiny of the broiler sector,” said Pivotal Research analyst Timothy Ramey.

Ramey continued by attempting to connect some of the dots of the case:

“We have long wondered how an industry marked by such volatility and lack of discipline could morph to a highly disciplined industry where production remains constrained and pricing remains high,” he said.

Over the past several years, public perception of the food production industry has certainly taken a turn for the worst, and we’re seeing many customers move away from giants like Tyson Foods in favor of organic meats.

Will this lawsuit add to this trend? Only time will tell, but it certainly doesn’t look like a great PR situation for any of the companies involved right now.

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