Share Sales Raise Issue at NovaStar

Subprime lender NovaStar Financial, Kansas City, Mo., said it might have "inadvertently" sold 337,000 shares of its stock in possible violation of securities laws, a move that could ultimately cost it $12.8 million.In a recent filing with the Securities and Exchange Commission, NovaStar said it recently discovered that it sold 50,000 shares under a company 401(k) plan and another 287,000 shares under a direct stock purchase and dividend reinvestment "in a manner that may not have complied with the registration requirements of applicable securities laws." The stock sales occurred during the past 12 months. NovaStar said holders of unregistered shares may have rescission rights or the right to recover damages, which means the company could be forced to repurchase shares, a move that might cost $12.8 million. NovaStar is already the subject of a consolidated lawsuit that alleges it made misleading statements for failing to disclose certain regulatory and licensing matters. In May, the company's motion to dismiss the allegations was denied. It believes the charges are without merit.