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Milberg LLP Files Securities Class Action Against LinnCo, LLC

Stock quotes in this article: LNCO

Insert after first graph: The action was filed in the Southern District of New York, and alleges that defendants violated Sections 11 and 15 the Securities Act of 1933 by issuing a materially false and misleading IPO Registration Statement.

The corrected release reads:

MILBERG LLP FILES SECURITIES CLASS ACTION AGAINST LINNCO, LLC

Milberg LLP announces that it has filed a class action against LinnCo, LLC (“LinnCo”) (Nasdaq: LNCO), certain of LinnCo’s officers and directors, and the underwriters involved in LinnCo’s initial public offering (IPO) on October 12, 2012. The class action was filed of behalf of investors who purchased LNCO shares in or traceable to LinnCo’s IPO on October 12, 2012 to July 1, 2013 (the “Class Period”), and seeks damages for defendants’ false and misleading statements in the Registration Statement and Prospectus filed with the SEC for the IPO.

The action was filed in the Southern District of New York, and alleges that defendants violated Sections 11 and 15 the Securities Act of 1933 by issuing a materially false and misleading IPO Registration Statement.

As alleged in the complaint, LinnCo is a Delaware limited liability company whose sole purpose is to own units representing limited liability company interests (“units”) in Linn Energy, LLC (“Linn”), an independent natural gas exploration and production company whose units trade on NASDAQ under the symbol “LINE.”

On October 12, 2012, LinnCo’s IPO Registration Statement became effective. As alleged in the complaint, certain metrics set forth in the Registration Statement (adjusted EBITDA, distribution coverage ratio, and distributable cash flow) were not, contrary to representation in the Registration Statement, accurate or reliable measures of Linn’s ability to make distributions because these metrics did not, among other issues, reflect the cost to Linn of settled put options.

In two articles published in February 2013 and in May 2013, Barron’s questioned Linn’s aggressive accounting practices. Among other things, Barron’s criticized Linn for masking considerable weakness in its distributable cash flows, thus calling into question the sustainability of its dividend. Barron’s questioned Linn’s accounting for its derivative contracts by excluding the cost of its puts from its cash flow, while including the gains.

Following the May 2013 Barron’s article, Linn units declined 7%, to close at $35.75 per unit on May 6, 2013. In turn, LNCO shares dropped nearly 8% to close at $39.24 per share on May 6, 2013.

On July 1, 2013, Linn and LNCO disclosed that the SEC had opened an informal inquiry into LNCO’s proposed merger with Berry, and Linn and LNCO’s hedging strategies and use of non-GAAP financial measures (the same accounting issues for which Linn and LNCO had been criticized by Barron’s).

On this news, LNCO shares dropped $10.12 per share, or 27.3%, within two trading sessions, to close at $26.95 per share on July 3, 2013.

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