A participant in the Gannett Company 401(k) Plan claims that plan fiduciaries breached their duties of “loyalty, prudence, and diversification under ERISA” by failing to decrease “significant” holdings of TEGNA common stock post TEGNA spin-off of Gannett, causing $135 million in losses to similarly situated participants. TEGNA spun off its publishing business, creating the new entity, Gannett, in June of 2015. According to the complaint, at the end of 2015, TEGNA common stock represented more than 80% of the Gannett Plan’s total common stock holdings (ex-Gannett stock). Additional risks were cited as the Plan was also heavily invested in Gannett common stock. As both Gannett and TEGNA are consumer-cyclical stocks, they tend to be highly correlated, and thus can react similarly to market conditions, thus dampening diversification opportunities. TEGNA stock was also cited as highly volatile – over 90% more volatile than the “stock market as a whole.” While the defendants liquidated the plan’s TEGNA common stock during 2017 (DOL filings yet to be filed), the plaintiffs state that the defendants knew that the stock should have been sold on or near the date of the spin-off. Defendants failed to take immediate action despite the $20.24 decline in the price of TEGNA common stock the day of the spin-off to its current price which approximates $14/share.
www.planadviser.com; March 27, 2018.
www.bna.com; March 27, 2018.