Bleichmar Fonti & Auld LLP is investigating Coastal Financial Corp for potential securities fraud after the bank's shares plunged 43.5 percent on a $68.8 million credit charge tied to an unnamed CCBX partner. The Everett, Washington-based bank reported a second-quarter net loss of $42.1 million, and Kirby McInerney LLP has opened a separate probe.
Bleichmar Fonti & Auld LLP opened a securities fraud investigation into Coastal Financial Corp after its shares plunged 43.5 percent on a $68.8 million credit charge.
The firm is examining whether Coastal misled investors about the financial performance and credit quality of its banking-as-a-service segment, including its CCBX partner relationships, BFA said in a statement. The probe covers statements made before the bank disclosed the charge on July 30.
Coastal, a bank holding company based in Everett, Washington, reported a second-quarter net loss of $42.1 million, or $2.76 per diluted share, compared with net income of $12 million, or $0.78 per share, a year earlier. The loss was driven by a $68.8 million credit expense related to a single, unnamed CCBX partner relationship, the company said. Shares fell $30.75, or 43.5 percent, to close at $39.91 that day, down from $70.66 on July 29.
The CCBX unit lets digital financial service providers, companies, and brands offer banking products to their customers through Coastal's charter. The credit charge tied to one partner relationship points to a deterioration in the credit quality of that book, a risk the bank had not flagged in prior quarters.
Kirby McInerney LLP has opened a separate investigation into possible violations of federal securities laws by Coastal or its senior management, the New York firm said. No lawsuit has been filed in either probe, and both remain at the information-gathering stage.
The probes add legal and reputational risk to a bank whose stock has lost nearly half its value in three weeks. BFA, which recovered more than $900 million from Tesla Inc.'s board and $420 million from Teva Pharmaceutical Industries Ltd., is representing investors on a contingency basis with no cost to shareholders. Investors who bought Coastal securities can submit information to the firm as it weighs a potential class action, with any fees subject to court approval. A formal complaint, if filed, would name the company and could seek damages tied to the stock's decline, extending the overhang on CCB shares until the case is resolved or dismissed. Investors will watch for further disclosure on the CCBX partner relationship and for the first lawsuit to be filed, which would set the lead-plaintiff timeline.
This article is for informational purposes only and does not constitute investment advice.
