Grabar Law Office is investigating potential claims on behalf of Vintage Wine Estates, Inc. (NASDAQ: VWE) shareholders. The investigation centers around whether certain directors and officers of Vintage Wine Estates breached fiduciary duties owed to Vintage Wine Estates and its shareholders.

According to an underlying class action complaint, Vintage Wine Estates, through certain of its officers and directors, made materially false and/or misleading statements and failed to disclose material adverse facts about the Company's business, from October 13, 2021 through February 8, 2023 (the “Class Period”).  Specifically, the Complaint alleges Defendants failed to disclose to investors: (1) that, due to a material weakness related to its inventory controls and procedures, the Company lacked a reasonable basis to report inventory metrics; (2) that the Company understated its overhead burden in certain quarters, thereby overstating its adjusted EBITDA; (3) that, as a result of the foregoing, Vintage Wine was reasonably likely to incur significant charges to restate prior reporting; and (4) as a result, Defendants’ statements about its business, operations, and prospects were materially false and misleading and/or lacked reasonable basis at all relevant times.

At the start of the Class Period, the Company acknowledged that it had “identified a material weakness in our internal control over financial reporting” that “relates to our process and controls regarding the tracking of costs through the various stages of inventory accounting, particularly as they pertain to bulk wine and spirits.”

While the Company claimed it was remedying these internal control deficiencies, Vintage Wine Estates was unable to maintain accurate records of its inventory or properly track and record its costs of goods sold because its accounting department was understaffed and lacked adequate procedures to manage the scale and complexity of its business. These facts have been confirmed both by the Company itself and many of its former employees.

Yet, during the Class Period, Defendants failed to disclose that: (i) the Company had not taken significant measures to remediate the material weakness concerning inventory balances; (ii) due to the mismanagement of inventory, Vintage Wine’s reported inventory did not reflect the value of inventory that was damaged and/or destroyed; and (iii) as a result, its inventory balances were overstated.

On September 13, 2022, after the close of trading, Vintage Wine Estates disclosed, amongst other things, that it had recorded $19.1 million in inventory adjustments and that its fourth quarter 2022 results included $6.8 million in overhead burden related to the first and second quarter of 2022.

On this news, on September 14, 2022, the price of Vintage Wine Estates stock, fell from the prior day’s close of $5.53 per share to close at $3.30 per share, a decline of 40.3%, on unusually heavy trading volume.

The September 13, 2022 disclosure did not reveal the full extent of the accounting issues at Vintage Wine Estates. Defendants still failed to disclose that: (i) the Company had an accounting error relating to the classification of certain assets and the classification and timing of recording certain costs; and (ii) that, as a result, the Company’s cost of goods sold and net revenue were understated and its expenses was overstated, resulting in an overstatement in net income.

On February 8, 2023, after the close of trading, the Company disclosed that the filing of the Company’s next quarterly report would be delayed because management had identified impairment indicators. Vintage Wine Estates also stated that certain previously issued financial statements should no longer be relied upon and should be restated as a result of an accounting error related to the classification and timing of recording certain costs. The Company further disclosed that Patrick Roney, the Company’s founder and long-term Chief Executive Officer had been removed as CEO since “It was critical that the Board make the necessary leadership changes to find the right talent to continue to execute our strategy....”

On this news, on February 9, 2023, Vintage Wine Estates’ stock price fell from the prior day’s close of $2.79 per share to close at $2.02 per share, a drop of 27.6%, on unusually heavy trading volume.

If you have continuously held Vintage Wine Estates, Inc. shares since on or October 13, 2021, you can seek corporate reforms, the return of funds back to the company, and a court approved incentive award.

If you would like to learn more about this matter at no cost to you, you are encouraged to contact us at jgrabar@grabarlaw.com, or call Josh Grabar at 267-507-6085.