NGL Energy Partners L.P. (NYSE: NGL) is under immense pressure after shedding more than 90% in market value over the past year. Last July, it traded over $14 per share, today it is $1.31. Many stocks of the Master Limited Partnership (MLPs) companies are currently trading near all-time lows as a wave of bad news continues to rattle investors.
A wave of class action lawsuits is the latest tailwind that looks set to take a toll on the NGL’s sentiments in the market.
Several investment fraud law firms have started investigations as to whether brokers might have defrauded investors on recommending investments in the NGL.
Matt Thibaut, a partner at Haselkorn & Thibaut, said, “The risk in sector is palatable and reminiscent of the 2013-2016 energy downturn. NGL and many other domestic companies impacted by the price of oil are similarly situated, and mom and pop retail investors who loaned money to NGL (and others) in the form of corporate bonds have been hurt, and the financial pain will continue for the foreseeable future.”
NGL Partners Security Fraud Claims
Several law firms are investigating security fraud claims against broker-dealers that recommended NGL Partners to investors without carrying out due diligence on the Company’s investments. The lawyers are seeking to recover losses as part of a FINRA arbitration claim process for investors who might have incurred losses on investing in the crude oil logistics and water treatment Services Company.
Many investors were lured by income and tax benefits. NGL was setup to receive 90% of its cash flow from a qualifying source on investing in things such as real estate, natural resources, or commodities. It is unclear whether NGL Partners had made such investments to receive cash flow for distribution to investors.
The ongoing investigation by Haselkorn & Thibaut seeks to ascertain whether the brokerage firm performed due diligence to make suitable recommendations to investors based on the investments the NGL had made. Preliminary findings have found out that some brokers might have concentrated their clients in the MLPs without disclosing the risks of such investment plays.
A closer look at NGL’s 10Q filing, it is clear NGL Partners is running low on liquidity levels due to post-quarter cash payments. Similarly, debt-funded acquisitions of Permian water disposal wells executed at high multiples also appear to have taken a toll on the Company’s balance sheet.