NFI Novastar Finl

WASHINGTON, Feb. 26 /PRNewswire/ -- Klafter & Olsen LLP has been retained to commence a securities fraud class action against NovaStar Financial Inc. ("NovaStar" or the "Company") (NYSE:NFI) and certain of its officers in the U.S. District Court for the Western District of Missouri on behalf of investors who purchased the publicly traded securities of NovaStar during the period from May 4, 2006 through February 20, 2007 (the "Class Period"). As described below, if you purchased NovaStar publicly traded securities during the Class Period, you have until April 24, 2007 to move to be appointed as a Lead Plaintiff. On February 20, 2007, after the markets closed, NovaStar announced a loss for the fourth quarter 2006. Furthermore, the Company stated that it expected to have little or no taxable income through 2011. One analyst called the Company's announcement a "bombshell." On this news, NovaStar's stock fell more than 42% the next day to close at $10.10 per share on February 21, 2007 on extraordinary volume of 22.5 million shares, more than 11 times the average three-month volume. The claims against the defendants assert that during the Class Period the defendants issued materially false and misleading statements regarding the Company's business and financial results. As a result of those false and misleading statements, NovaStar stock traded at artificially inflated prices during the Class Period, reaching a high of $37.59 per share in May 2006. Specifically, the true facts, which were concealed from the investing public, were that: (i) the Company lacked requisite internal controls, particularly with respect to loan delinquencies and, as a result, the Company's projections and reported results issued during the Class Period were materially false and misleading; (ii) the Company's financial statements were materially misstated due to its failure to properly account for its allowance for loan losses; (iii) given the deterioration and the increased volatility in the subprime market, the Company would be forced to tighten its underwriting guidelines which would have a direct material negative impact on its loan production going forward; and (iv) given the increased volatility in the lending market, the Company had no reasonable basis to make projections about its ability to maintain its Real Estate Investment Trust ("REIT") taxable income, which drives dividends, and potentially even its very status as a REIT. If you purchased NovaStar publicly traded securities during the Class Period (May 4, 2006 - February 20, 2007), you may, no later than April 24, 2007 move to be appointed as a Lead Plaintiff. A Lead Plaintiff is a representative party that acts on behalf of other class members in directing the litigation. If you have sustained losses on your purchases of NovaStar publicly traded securities during the Class Period, please contact Klafter & Olsen LLP at http://www.klafterolsen.com/ or call us at 202/261-3553 for a more thorough explanation of the Lead Plaintiff selection process and the claims that can be asserted against NovaStar. Klafter & Olsen LLP has extensive expertise in prosecuting investor class actions involving financial fraud and has offices in Washington D.C. and New York. Please visit our website for more information about the Firm. DATASOURCE: Klafter & Olsen LLP CONTACT: Kurt B. Olsen of Klafter & Olsen LLP, +1-202-261-3553 Web site: http://www.klafterolsen.com/

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