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Malibu Boats $7.8M Investor Settlement has been reached to resolve claims that the Tennessee-based powerboat maker artificially inflated sales by flooding one of its top dealers with excess inventory, pushing it to the brink of bankruptcy during the post-pandemic industry downturn.

In a Thursday filing in Manhattan federal court, lead plaintiff Retiree Benefit Trust of the City of Baltimore asked U.S. District Judge Lorna G. Schofield to grant preliminary approval, calling the agreement an “excellent result” given Malibu’s dwindling cash reserves and shrinking directors’ and officers’ liability insurance.

Shareholders Secure Above-Average Recovery

The settlement is expected to return between 11% and 32% of estimated damages to investors — a figure notably higher than the 2024 average securities class action recovery of 7.3%, according to the pension fund’s filing.

“This represents a highly favorable result,” the investors said, noting that recoveries could reach four times the national median for similar lawsuits.

Allegations of Inventory “Pump and Dump”

The lawsuit claimed that when the COVID-19 boat-buying boom began to fade in 2022, Malibu Boats executives sought to prop up profits by forcing a key dealer to buy more than $100 million worth of unwanted, high-margin boats.

Investors alleged the company misled shareholders by assuring them its wealthy customer base was “not really affected” by interest rates or economic pressures. In reality, demand slumped as borrowing costs rose, leaving dealers swamped with excess inventory.

According to filings, Malibu’s pandemic-era surge was dramatic — with 42% sales growth in fiscal 2021 and another 30% increase in fiscal 2022. But by mid-2022, those gains reversed, triggering claims the company engaged in aggressive channel stuffing to mask the slowdown.

Legal Teams Weigh In

The Baltimore pension fund is represented by Lester R. Hooker, Steven B. Singer, Joshua H. Saltzman, and Sara DiLeo of Saxena White PA.

The defense team includes Sarah M. Lightdale, Aric H. Wu, Reed A. Smith, Anne E. Bigler, and Brett De Jarnette of Cooley LLP.

Neither side immediately responded to requests for comment Friday.

If approved, the deal will end two years of litigation accusing Malibu Boats of misrepresentation and inventory manipulation to reassure Wall Street as sales momentum faded.