ServiceMaster Global Holdings, Inc.
Lead Plaintiff Deadline: 06/09/2020
SUMMARY OF CASE:
A securities class action has been filed against ServiceMaster Global Holdings, Inc. (SERV) on behalf of all persons or entities who purchased or otherwise acquired the publicly traded common stock of ServiceMaster between February 26, 2019 through November 4, 2019. This case has been filed in the USDC – S.D.N.Y.
ServiceMaster is a leading provider of essential services to residential and commercial customers in the termite, pest control, cleaning and restoration markets. ServiceMaster’s largest and most profitable business segment is Terminix, a termite and pest control business that primarily operates in the United States. Among other services, Terminix offers an annual coverage plan for its termite customers, which indemnifies the customer against the cost of treatments and repairs.
The Complaint alleges that during the Class Period, Defendants repeatedly assured the market that ServiceMaster was successfully executing upon initiatives to improve the performance in the Terminix segment. In addition, Defendants stated that Terminix would reach a positive “inflection point” and was “definitely the driver” for positive trends expected in the second half of 2019. Unbeknownst to investors, however, in the past several years the Terminix segment had experienced an adverse trend of costly termite litigation, primarily related to Formosan termite activity. This negative trend, which would ultimately impact ServiceMaster’s current and future financial results, was known to Defendants throughout the Class Period, as by their own later admission they had been taking mitigating measures since 2018.
On October 22, 2019, ServiceMaster announced disappointing preliminary financial results for the third quarter 2019, having missed revenue and earnings estimates, and issued downward adjusted EBITDA guidance. The press release attributed the disappointing results to “termite damage claims arising primarily from Formosan termite activity,” primarily in Mobile, Alabama. The Company further stated that this had been a known issue, having taken mitigating measures “starting in 2018.” Finally, the Company announced the sudden departure of Matthew J. Stevenson in his role as President of Terminix Residential.
On this news the price of ServiceMaster common stock fell $11.44 or 20 percent, closing at $44.70 on October 22, 2019, down from its $56.14 closing price on October 21, 2019.
On November 5, 2019, before the start of trading, ServiceMaster released its third quarter 2019 financial results. In this press release discussing the “challenging quarter,” the Company revealed that it had been impacted by certain “legacy risks,” including “termite damage claims.” That same day, Defendants held an earnings call with analysts and investors to discuss ServiceMaster’s third quarter 2019 financial results. On the call, Defendants informed the market that the increase in termite litigation—which had occurred “[i]n the past few years”—had impacted termite revenue and these issues would continue throughout 2020.
On this news, the price of ServiceMaster common stock fell $1.42, or 3.5 percent, to close at $39.15 on November 5, 2019. As the market continued to digest the disappointing news, ServiceMaster shares further declined by $3.41, or 9 percent, closing at $35.74 on November 6, 2019. All told, following the November 5, 2019 disclosure, ServiceMaster stock suffered a total decline of $4.83 from the November 4, 2019 closing price.