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Compass Diversified (CODI) Faces Crisis as Lugano Scandal Forces Downgrade, Investor Lawsuit – Hagens Berman

1. CODI faces a significant stock downgrade due to an accounting scandal. 2. Over 70% of CODI's market value erased in three months. 3. S&P downgraded CODI's credit rating to 'B-' with negative implications. 4. CODI suspended distributions and halted investments to manage liquidity. 5. Legal challenges arise from a class action lawsuit by investors.

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FAQ

Why Very Bearish?

The downgrade and legal issues drastically undermine investor confidence, leading to severe stock depreciation. Historically, similar scandals often result in multi-month dips, with companies taking years to recover.

How important is it?

The magnitude of the price drop, ongoing legal issues, and loss of investor confidence indicate a high likelihood of further negative impact on CODI's price.

Why Long Term?

Given the severity of the allegations and ongoing investigations, recovery may take years, as seen with other similarly affected firms like Enron and Lehman Brothers.

Related Companies

S&PJefferiesLugano Holdings
SAN FRANCISCO, June 13, 2025 (GLOBE NEWSWIRE) -- Compass Diversified’s (NYSE: CODI) tumultuous spring continued as Jefferies analysts recently downgraded the company’s stock amid a sweeping securities class action lawsuit filed by investors, both moves stemming from a widening accounting scandal at its Lugano subsidiary.  The dual blows—Wall Street’s loss of confidence and mounting legal challenges—have sent Compass’s shares into a tailspin, erasing over 70% of the company’s market value over the past three months and casting a pall over the once high-flying holding firm.   Hagens Berman is investigating the alleged fraud claims and urges investors who purchased Compass shares and suffered substantial losses to submit your losses now. Class Period: May 1, 2024 – May 7, 2025Lead Plaintiff Deadline: July 8, 2025Visit: www.hbsslaw.com/investor-fraud/codi Contact the Firm Now: CODI@hbsslaw.com                                        844-916-0895 Analysts Hit the Brakes On June 9, Jefferies analysts, long bullish on Compass Diversified, abruptly shifted their stance, downgrading the stock from Buy to Hold. The catalyst: a deepening probe into accounting irregularities at Lugano Holdings, the company’s luxury jewelry subsidiary. The investigation, which has already triggered a securities class action, has cast a long shadow over Compass’s financial credibility. Compass’s troubles began to snowball after revelations that Lugano’s former CEO orchestrated unauthorized third-party funding deals and manipulated inventory valuations. These actions forced Compass to delay its first-quarter 2025 financial filing and announce a sweeping restatement of its 2024 results. Jefferies slashed its price target to $7.30—a dramatic cut from the previous $28.00—assigning zero value to Lugano amid expectations of a protracted recovery. Credit Rating and Stock Listing Under Pressure The accounting scandal’s fallout has not been confined to Wall Street. S&P Global Ratings downgraded Compass Diversified’s credit to ‘B-’ and placed the company on CreditWatch with negative implications, citing unreliable financial statements and heightened uncertainty. In response, Compass has scrambled to shore up liquidity. The company entered a forbearance agreement with lenders, suspended quarterly distributions, and halted further investment in Lugano. Leadership changes swiftly followed, with Josh Gaynor stepping in as interim CEO after Lugano’s founder, Moti Ferder, “resigned.” The New York Stock Exchange has weighed in, issuing a notice of non-compliance for Compass’s failure to file its first-quarter report on time. The company now faces a six-month deadline to regain its listing status. Compass Investor Class Action Meanwhile, the legal front is heating up. In federal class actions filed in the Central District of California, investors allege that the company and its top brass misled the market by failing to disclose Lugano’s accounting missteps and the resulting distortions in Compass’s 2024 financials. The suit seeks to represent investors who bought Compass securities between May 1, 2024, and May 7, 2025. Compass’s acquisition of Lugano in 2021, once touted as a strategic coup at a $256 million enterprise value, now appears fraught with risk. Plaintiffs argue that Compass failed to implement effective internal controls, leaving investors exposed to hidden liabilities. Hagens Berman’s Investigation The shocking events at Compass has drawn the attention of Hagens Berman, a national investor rights law firm investigating the alleged securities violations. “We’re seeing the market react decisively to the allegations at the heart of the lawsuit—Jefferies’ downgrade underscores just how seriously Wall Street is taking the alleged breakdown in Compass Diversified’s internal controls,” said Reed Kathrein, the Hagens Berman partner leading the investigation. “Our focus is on whether Compass’s leadership misled investors about the scope of the accounting irregularities at Lugano, and whether these failures to disclose material facts violated federal securities laws.” 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. About Hagens BermanHagens 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

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