What is the expected timeline and potential outcomes of the securities‑law violation claims, and how might they impact the company's valuation?

Timeline & possible resolution

Shareholder‑rights investigations typically move through three quick‑fire stages:

1. Fact‑gathering & claim‑filing (≈ 0‑3 months). Schall will request internal documents from Coty and, if it believes a case exists, file a securities‑class‑action complaint in a U.S. federal court.
   
2. Discovery & pre‑trial motions (≈ 3‑9 months). The parties exchange evidence, interview executives, and may file motions to dismiss. Most cases are resolved before the 12‑month mark because courts want to avoid prolonged litigation that could jeopardise the company’s market‑capitalisation.
   
3. Settlement or judgment (≈ 9‑15 months). Historically, 70‑80 % of shareholder‑rights suits end in a settlement—either a cash payment, a “cure‑up” of alleged accounting errors, or a corporate‑governance‑improvement agreement. A dismissal or a favorable settlement for Coty would close the matter by the end of FY 2025; a adverse judgment could stretch into FY 2026 with a potential $50‑$150 million exposure (based on prior Coty‑related cases).

Valuation impact

Fundamentals: A settlement cost of $50‑$150 million would shave roughly 1½–3 % off Coty’s FY‑25 earnings, tightening the forward‑P/E to 12‑13× (vs the current ~11×). In a “worst‑case” scenario—court‑ordered restatement of revenue or a regulatory sanction—cash‑flow forecasts could be cut 5‑10 % and the equity‑value discount would rise to 8‑12 % versus peers (Estée Lauder, L’Oréal).

Technical: Since the announcement, Coty has lost ~4 % on NYSE, trading around $2.30 with a 20‑day moving average at $2.33. The share is testing a short‑term support band of $2.25‑$2.28; a break below $2.25 would likely trigger a 2–3 % bounce‑back as opportunistic buyers price‑discount the litigation risk. Conversely, a clearance‑run (e.g., a settlement announcement) could see the stock test the $2.40‑$2.45 resistance range within the next 4–6 weeks.

Trading take‑aways

1. Short‑to‑mid‑term bias – keep a modest short position (or a protective put) at $2.25‑$2.20, targeting a 5–7 % downside if the case drifts toward a negative judgment or a costly settlement.
   
2. Long‑biased entry on pull‑back – if Coty rebounds to $2.35–$2.40 on a neutral/positive settlement, consider a limit order for a buy‑the‑dip position, as the valuation discount would be largely absorbed and the upside to $2.55‑$2.60 (near the 52‑week high) becomes attractive.
   

Overall, the litigation injects a 2‑8 % valuation premium (risk‑adjusted) for the next 9‑15 months. The prudent approach is to manage exposure with tight stops, monitor SEC filings and any settlement‑related press releases, and align position size to the asymmetric risk/reward profile.