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Seadrill Ltd. Class Actions Combine Their Stock and Options Claims

A Manhattan federal judge on Tuesday consolidated three fraud class action suits claiming Bermuda-based Seadrill Ltd. misled investors with vows to preserve its chunky dividend payments, adding to the original stock-purchasing plaintiffs a new universe of claimants who bought options in the offshore drilling giant.

U.S. District Judge Lorna G. Schofield’s move set up a potential squabble over which plaintiff would lead.

Plaintiffs including Issek Fuchs sued in December, on behalf of stock purchasers who saw Seadrill’s share value drop after the company announced in November that it would suspend dividends. Stock-purchase plaintiff Ron Heron followed with a suit in January. Then in March, plaintiff Sheldon Glow sued on behalf of stock and options investors.

Judge Schofield said Tuesday that “there is a basis to consolidate.” She called for a new round of notice to potential class members to clarify that options claims were in play. She also called for briefing on how to select a lead plaintiff or whether to potentially select two leads — one for buyers of Seadrill’s U.S.-traded equity and another for options traders.

Seadrill’s counsel said Tuesday it would respond after consolidation was complete.

The company “shocked the market” on Nov. 26, when it disclosed that it would be suspending its annual $4-per-share dividend, causing the price of its American depository receipts to plunge that day from $20.71 to $15.19.

That big miss came after Seadrill’s summer 2014 statements that the company was “in the best possible financial situation” and enjoyed “significant flexibility to support the dividend,” the plaintiffs claim.

On raising its quarterly dividend from $0.98 to $1 per share in May 2014, Seadrill had called the move “sustainable in the coming years,” the suits say.

But Seadrill management knew its statements were materially false and misleading, the plaintiffs allege.