New Source Energy Partners L.P.
Robbins Arroyo LLP: New Source Energy Partners L.P. (NSLP) Misled Shareholders According to a Recently Filed Class Action
Robbins Arroyo LLP announces that a class action complaint was filed in the Supreme Court of the State of New York. The complaint alleges that officers and directors of New Source Energy Partners L.P. (Other OTC: NSLP) violated the Securities Act of 1933 in relation to its offering of Series A Preferred Units and in connection with the filing of its Registration Statement and Prospectus with the U.S. Securities and Exchange Commission (“SEC”) on May 7, 2015. New Source Energy acquires, owns, develops, and produces oil and natural gas properties in the United States.
New Source Fails to Disclose Declining Financial Position in its Prospectus
According to the complaint, New Source filed a Prospectus and Registration Statement with the SEC that contained false and misleading statements. Specifically, New Source was suffering from such severe cash flow constraints that a downtick in oil prices would likely put it on the brink of insolvency. Nevertheless, the risk factors detailed in the Prospectus did not disclose the severity of its cash flow and other financial troubles.
Further, as revealed in a lawsuit New Source had filed against New Dominion in the District Court of Tulsa County on March 31, 2015, and undisclosed in the Prospectus, New Source was already under crippling financial pressure from New Dominion’s withholding of revenues owed to New Source during 2014 and 2015. Rather than disclose the cash flow problems in the Tulsa Action, New Source touted that its primary business objective was to “generate stable cash flows, allowing the Partnership to make quarterly cash distributions to its unitholders, and over time, to increase those quarterly distributions.”
On July 29, 2015, New Source announced that it was suspending the quarterly cash dividend to common unit holders, citing the continued low commodity price environment and current market conditions. Then, on August 8, 2015, New Source reported a loss of $111 million for the second quarter of fiscal 2015, and warned it could have difficulty covering its financial obligations over the next twelve months. On September 29, 2015 and October 13, 2015, several analysts downgraded New Source shares. The company currently has an average rating of “sell.”
While the offering price of Series A Preferred Units was $25 per unit, the revelation of New Source’s financial issues has caused the market price for the Series A Preferred Units to fall approximately 94.6% to $1.36 per unit as of October 21, 2015.
New Source Shareholders Have Legal Options
Concerned holders of Series A Preferred Units who would like more information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.