Hospital giant HCA Holdings has reached a preliminary agreement to pay $215 million to settle a class action lawsuit filed by shareholders who alleged the company used false and misleading information to sell stock during its 2011 initial public offering.
Those behind the 2011 lawsuit alleged that HCA sold more than $4.3 billion of HCA common stock at $30 a share based on a misleading registration statement it filed with the Securities and Exchange Commission.
They allege that the registration statement omitted important facts, including that at the time of the IPO, the company's Medicaid revenue was “suffering from adverse trends,” and that the Medicaid revenue was suffering from declining demand for cardiovascular and other services because of physician attrition and changes in Medicare regulations. They also alleged improper accounting led to HCA overstating its earnings by $790 million.
HCA also announced Wednesday in an SEC filing that it had reached preliminary agreements to settle several shareholder derivative cases also related to the 2011 IPO. Shareholder derivative cases are those in which a shareholder sues a third party, often a company director or officer, on behalf of the company. HCA estimated it would face legal claim costs of about $120 million for the settlements of the shareholder action and shareholder derivative cases.
