The other day I received the notice below. It states that a law firm is bringing a class action law suit against Nutrisystem (NTRI) saying that the company cooked the books to fool investors in a scheme that, once uncovered, resulted in a huge one day drop in their stock. I’m sure there were a lot of investors that lost a lot of money that day. They were unfairly duped by these mean corporate criminals and they deserve some payback! (or so the argument goes.)

Why did this show up in my mailbox? I went short NTRI on that day and covered my position for a small loss. This apparently put me on a list of shareholders on record that might be interested in joining the class action lawsuit.

I thought this was interesting for a couple reasons.

• I had no position in NTRI at all until around 10AM EST that day when I went short.
• Because I was short I was trying to profit from a drop in the price (of course).

They had to have gotten some trading records showing the transaction of my trade that day. I’m surprised that I received this notice at all. It was the first one like this I’d ever received since I’ve been trading.

I thought it was interesting and shrugged it off.

Then I received two more within the next two weeks from the same firm for similar trades where I was short.

The first thing I thought was – wow, what a waste of money for this legal firm. There has to be thousands and thousands of traders that trade these stocks that drop with such volatility on these days. Stocks like these draw the attention of most of the daytrading world. It must cost this firm an arm and a leg to send these notices out, most of which apparently go to traders which in many cases are trying to profit from a further drop in the stock’s price.

Surely you cannot participate in such a class action law suit just by going short the stock on the day of a huge drop.

Did/does anyone else get these in the mail? Has anyone looked into the details of participating? BTW, I’m not looking to jump on board, I’m just a curious observer.

Related posts:

1. How I Became a Dummy Trader
2. Dummy Trading – “Creative” Entries?
3. New Highs/Lows on Big Volume for Tuesday, April 25
4. New Highs/Lows on Big Volume for Wednesday, June 14
5. Article Published in Technical Analysis of Stocks and Commodities Magazine