(Updates with further description of lawsuit’s claims, background on Costco deal)
By Nate Raymond
NEW YORK, July 30 (Reuters) - American Express Co was accused in a lawsuit on Thursday of blindsiding investors with the loss of a crucial contract with Costco Wholesale Corp after having failed to reveal how significant that business had become.
In a lawsuit filed in Manhattan federal court, shareholder Plumbers and Steamfitters Local 137 Pension Fund sought class action status on behalf shareholders who suffered losses after the credit card company in February announced the end of its co-branding agreement with the warehouse club retailer.
AmEx at the time said the loss of the contract, set to expire March 31, 2016, would hurt earnings for the next two years.
Over the next two days, AmEx’s stock plummeted, losing $8 per share to close at $77.53, according to the lawsuit. The decline wiped out close to $9 billion of market value.
Representatives for American Express did not immediately respond to requests for comment.
Costco, which sells everything from jewelry to fresh produce at its cavernous members-only stores, had an exclusive co-branding arrangement with AmEx since 1999 for the store’s U.S. business.
According to the lawsuit, AmEx did not disclose the revenues and loan volume generated through the agreement with Costco until February when the company announced it was ending its arrangement with the retailer.
The lawsuit said that by 2014, the Costco business had in fact generated 8 percent of the company’s revenues and 20 percent of its outstanding loans.
The lawsuit said that by October, unbeknownst to investors, AmEx and Costco had begun discussing renewing the U.S. agreement. AmEx subsequently on Feb. 12 announced the end of that business.
The complaint said that by concealing the value of Costco’s relationship and its financial prospects, AmEx overstated the continuing revenue growth for its U.S. card services segment.
The lawsuit seeks class action status on behalf of investors who bought its stock between Oct. 16 and Feb. 11.
The case is Plumbers and Steamfitters Local 137 Pension Fund v. American Express Company, U.S. District Court, Southern District of New York, No. 15-05999. (Reporting by Nate Raymond in New York; Editing by Ken Wills)