colonial bank securities litigation update

In re Colonial Bancgroup Securities Litigation (M.D. Ala.)

Feb. 12, 2009 - Donaldson & Guin, LLC has commenced a class action securities case against Colonial Bancgroup, Inc. and certain of its officers, alleging that Colonial failed to disclose a key condition to its receipt of federal assistance from the Troubled Assets Relief Program ("TARP").

On December 2, 2008, Colonial represented that it would receive $550 million from the U.S. Treasury as part of the TARP program. In response to that positive news, Colonial's stock bounced from $2.00/share on December 1, 2008 to $3.08/share on December 2, 2008, an increase of 50%. However, on January 27, 2009, Colonial disclosed that it had lost $825 million in the fourth quarter of 2008, and $880 million for the full year of 2008. At the same time, Colonial disclosed that it had been unable to obtain the promised TARP funds because it had not been able to raise the $300 million in private equity the Treasury Dept. had required as a condition to the subsidy. This was the first time that Colonial ever disclosed that its receipt of TARP funds was conditioned on raising $300 million of private equity. In response to the news that Colonial had not - in fact - received the promised TARP funds, Colonial's stock price dropped 46% to only $0.85/share.

As The Wall Street Journal reported on January 29, 2009, raising $300 million in today's environment is a "tall order". Clearly, such a major and questionable condition to obtaining the TARP bailout should have been disclosed to the market.

Investors have until April 10, 2009 to seek lead plaintiff status in the litigation.