Class Action Reminder Amplifies Perrigo's Legal Risks Amid Fragile Turnaround

What happened

Levi & Korsinsky has reminded Perrigo investors of a pending class action lawsuit alleging securities fraud from February 27, 2023, to November 4, 2025. This period overlaps with Perrigo's strategic pivot to OTC self-care, cost-saving initiatives, and significant stock price declines. The lawsuit adds to the company's existing legal overhangs, including a €1.64bn Irish tax dispute and high leverage of ~7x net debt/EBITDA. Investors must decide on joining the lawsuit by the lead plaintiff deadline of January 16, 2026, amid ongoing operational challenges. This development underscores persistent governance and financial risks that could undermine management's turnaround efforts.

Implication

First, a substantial settlement could strain Perrigo's already weak balance sheet, exacerbating its high leverage and thin interest coverage. Second, legal distractions may impede execution of critical programs like Project Energize and Supply Chain Reinvention, which are essential for margin improvement. Third, investor confidence could erode further, raising borrowing costs and limiting financial flexibility needed for growth investments. Fourth, this reinforces the skepticism embedded in the stock's deep discount, making a near-term re-rating less likely. Finally, while the lawsuit doesn't negate Perrigo's long-term potential, it heightens execution risk and necessitates cautious monitoring of legal resolutions.

Thesis delta

The DeepValue thesis already flagged legal risks, but this news elevates the class action from a background concern to an immediate threat, increasing short-term downside pressure. It doesn't invalidate the potential buy case based on cost savings and market scale, but investors must now weigh a higher likelihood of adverse financial or operational impacts. This shift underscores the need for tighter risk management and possibly delaying investment until clearer legal outcomes emerge.