SAN FRANCISCO, CA / ACCESS Newswire / June 17, 2025 / Compass Diversified (NYSE:CODI), a Connecticut-based private equity firm, is navigating a turbulent period marked by the recent resignation of a key director, a precipitous stock decline, and a burgeoning class-action lawsuit, all stemming from unearthed accounting irregularities at one of its portfolio companies.
Hagens Berman is investigating the claims and urges investors who purchased Compass shares and suffered substantial losses to submit your losses now.
Class Period: May 1, 2024 - May 7, 2025
Lead Plaintiff Deadline: July 8, 2025
Visit: www.hbsslaw.com/investor-fraud/codi
Contact the Firm Now: CODI@hbsslaw.com
844-916-0895
Board Departure Amidst Mounting Corporate Woes
Gordon M. Burns stepped down from Compass Diversified's board on June 7, 2025, a decision foreshadowed by his earlier choice not to seek re-election, citing other commitments. This departure coincides with a particularly fraught time for the firm, as it confronts the fallout from "troubling accounting practices" at Lugano Holdings, a high-end jewelry subsidiary acquired in 2021 for an enterprise value of $256 million.
In response to the escalating crisis, the firm has enacted a series of urgent, decisive measures aimed at shoring up its financial position. These include securing a forbearance agreement with its lenders, implementing a reduction in management fees, and, notably, suspending its quarterly cash distribution - a payout highly valued by its income-focused investor base.
Furthermore, Compass Diversified has announced a strategic re-prioritization, vowing to curtail new investment in Lugano Holdings. This recalibration is designed to reallocate resources and focus attention on its other eight portfolio companies, ostensibly to mitigate further contagion from the Lugano controversy.
Securities Fraud Suit
The revelation of these irregularities has ignited a securities class action lawsuit, Augenbaum v. Compass Diversified Holdings, No. 25-cv-01003 (C.D. Cal.). The lawsuit seeks to represent purchasers or acquirers of Compass Diversified Holdings' publicly traded securities between May 1, 2024, and May 7, 2025. The plaintiffs contend that during this "Class Period," defendants disseminated "false and/or misleading statements" and failed to disclose critical information.
Specifically, the lawsuit alleges that Lugano Holdings contravened "applicable accounting rules and acceptable industry practices" concerning its financing, accounting, and inventory procedures throughout Compass Diversified's fiscal year 2024. Consequently, the lawsuit claims, Lugano's 2024 financial results were "artificially distorted." The complaint further asserts that Compass Diversified neglected to implement "effective internal controls" over its financial reporting, leading to materially misstated 2024 financial results that did not accurately reflect the company's true financial standing.
The catalyst for the current turmoil was Compass Diversified's May 7, 2025, press release, titled "Compass Diversified Discloses Non-Reliance on Financial Statements for Fiscal 2024 Amid an Ongoing Internal Investigation into its Subsidiary, Lugano Holding, Inc." In this disclosure, the firm revealed that it had "preliminarily identified irregularities in Lugano's non-CODI financing, accounting, and inventory practices." Following discussions with senior leadership and investigators, the Audit Committee of CODI's Board concluded that "previously issued financial statements for 2024 require restatement and and should no longer be relied upon." The company also announced its intention to delay the filing of its first-quarter 2025 Form 10-Q.
The market's immediate response was severe, with the price of Compass Diversified's stock plummeting by more than 62% on the news. The class action lawsuit charges Compass Diversified Holdings, Compass Group Diversified Holdings LLC, Compass Group Management LLC, and certain current and former top executives with violations of the Securities Exchange Act of 1934.
Hagens Berman's Investigation
Hagens Berman, a national investor rights law firm, has announced it is conducting its own investigation into potential securities violations by Compass Diversified.
"The cascade of events, from the restatement of financials to the drastic measures to conserve cash, suggests a deeply entrenched issue at Lugano that Compass Diversified seemingly failed to adequately oversee," said Reed Kathrein, the partner at Hagens Berman leading the firm's probe.
If you invested in Compass Diversified and have substantial losses, or have knowledge that may assist the firm's investigation, submit your losses now »
If you'd like more information and answers to frequently asked questions about the Compass Diversified case and our investigation, read more »
Whistleblowers: Persons with non-public information regarding Compass Diversified should consider their options to help in the investigation or take advantage of the SEC Whistleblower program. Under the new program, whistleblowers who provide original information may receive rewards totaling up to 30 percent of any successful recovery made by the SEC. For more information, call Reed Kathrein at 844-916-0895 or email CODI@hbsslaw.com.
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About Hagens Berman
Hagens Berman is a global plaintiffs' rights complex litigation firm focusing on corporate accountability. The firm is home to a robust practice and represents investors as well as whistleblowers, workers, consumers and others in cases achieving real results for those harmed by corporate negligence and other wrongdoings. Hagens Berman's team has secured more than $2.9 billion in this area of law. More about the firm and its successes can be found at hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.
Contact:
Reed Kathrein, 844-916-0895
SOURCE: Hagens Berman Sobol Shapiro LLP
View the original press release on ACCESS Newswire:
https://www.accessnewswire.com/newsroom/en/business-and-professional-services/compass-diversified-codi-grapples-with-financial-irregularities-1040740
