San Diego law firm has filed a class action suit against Pilgrim's Pride Corp. on behalf of shareholders who bought the company's stock during the period between May 5 and Sept. 24, 2008.

The lawsuit, commenced by Coughlin Stoia Geller Rudman & Robbins LLP, alleges that during this period, the Pittsburg, Texas-based processor misrepresented its financial condition and concealed how its capital problems would affect its business.

Pilgrim's Pride released a statement on Sept. 24 predicting that it would see significant fourth quarter losses and subsequently saw its shares fall from $10.26 per share to $3.84 per share over a two day period. The lawsuit alleges that Pilgrim's withheld crucial information before the September release that would have affected stock purchasing decisions.

Shares take a dive

Meanwhile, Pilgrim's shares slid to under $1 on Thursday, following a report this week from independent research firm CreditSights that the company was likely facing bankruptcy. According to the firm, "a bankruptcy scenario … seems highly probable," once the extended 30-day grace period that the company's lenders extended on its covenant waiver expires on Nov. 26.

Pilgrim's shares were halted on the New York Stock Exchange Thursday and proceeded to drop to as low as 83 cents per share on the small-cap Arca platform. "It is trading electronically. That change will be invisible to the average investor," Pilgrim's Pride spokesman Ray Atkinson told Reuters.

Atkinson added that Pilgrim's is working to improve operations and has no plans in filing for Chapter 11 bankruptcy protection. He maintains that a bankruptcy filing would not be in the company's – or its investors' – best interest.