Shares of Thai Union Group Pcl (BKK:TU) slipped 0.9% to 11.50 baht on the Stock Exchange of Thailand, as a lawsuit filed by Red Lobster creditors continues to weigh on the seafood giant. The legal action, centered on alleged financial mismanagement, has created a creditor pool of approximately $295 million—equivalent to about 9.85 billion baht and nearly one-fifth of Thai Union's equity value.
The lawsuit, brought by a creditor-owned trust in Florida last month, targets $32 million in transactions from 2023 that the trust claims were orchestrated to benefit Thai Union at Red Lobster's expense. This amount is almost equal to Thai Union's first-quarter net profit of 1.1 billion baht, underscoring the materiality of the claims. The complaint seeks a jury trial to determine damages, though the $295 million figure represents the total creditor pool rather than a fixed damages amount.
According to the filing, Thai Union allegedly forced Red Lobster to purchase excessive shrimp under terms that made no economic sense, transforming a limited-time offer into what the suit describes as a 'car crash.' The permanent $20 'Endless Shrimp' promotion is said to have diverted diners from higher-margin menu items and caused shrimp shortages, further straining Red Lobster's finances. This echoes arguments from Red Lobster's former CEO, Jonathan Tibus, who noted in 2024 that Thai Union exerted outsized influence on shrimp purchasing decisions.
Thai Union has denied any wrongdoing and declined to comment on the litigation. The company had sought to exit its Red Lobster investment in early 2024, citing a mismatch with its capital plans. It recorded a non-cash impairment of 18.5 billion baht, representing roughly 38% of its current equity. The restaurant chain emerged from Chapter 11 bankruptcy in September 2024 as a private entity under RL Investor Holdings LLC, backed by Fortress Investment Group, TCW Private Credit, and Blue Torch.
The stock's decline reflects investor concern over the potential financial impact. The $32 million clawback demand is nearly triple the earlier $11 million charge related to the Endless Shrimp promotion, while the $295 million creditor pool is about nine times Thai Union's first-quarter profit. The company's shares traded between 11.50 and 11.60 baht during the session, with turnover of 48.5 million baht.
Despite the legal headwinds, Thai Union's core business has shown resilience. The company reported a 7.6% increase in first-quarter sales to 32.1 billion baht, with operating profit rising 29% to 1.2 billion baht and net profit climbing 9.2% to 1.1 billion baht. CEO Thiraphong Chansiri highlighted strong momentum in the PetCare and Frozen segments, alongside declining transformation costs.
Industry analysts note that the lawsuit adds uncertainty to Thai Union's recovery narrative. The company's previous impairment and the legal exposure may temper investor enthusiasm, even as its main operations improve. The outcome of the case could have broader implications for Thai Union's financial health and strategic direction, particularly given the size of the creditor pool relative to its equity base.
