NEW YORK, June 9, 2004- LAWFUEL -The law firm of Milberg Weiss Bersh…

NEW YORK, June 9, 2004- LAWFUEL -The law firm of Milberg Weiss Bershad & Schulman LLP announces that the class action lawsuit filed on April 15, 2004, has been amended to include sellers of put options in the class definition. The amended complaint is brought on behalf of anyone who purchased the securities of NovaStar Financial, Inc. (“NovaStar” or the “Company”) (NYSE: NFI), and/or sold NovaStar put options, between October 29, 2003 and April 11, 2004, inclusive (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). A copy of the complaint filed in this action is available from the Court (from the office of the Clerk of Court), and may also be obtained by visiting Milberg Weiss at

The action, numbered 04-0334-CV-W-DW, is pending in the United States District Court for the Western District of Missouri, Western Division, against defendants NovaStar, Scott F. Hartman (CEO, Chairman), W. Lance Anderson (President, COO) and Rodney E. Schwatken (Principal Accounting Officer). According to the complaint, defendants violated sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5, by issuing a series of material misrepresentations to the market during the Class Period.

The complaint alleges that throughout the Class Period, NovaStar issued press releases, and filed financial reports with the SEC, reporting record growth on the strength of its core business. Unbeknownst to investors, the complaint charges, the Company’s growth had outpaced its ability to maintain compliance with applicable regulations governing its business, thereby subjecting the Company to fines, regulatory action(s) and the serious, but undisclosed, risk that such non-compliance could materially and negatively impact the Company’s ability to conduct business. Instead of disclosing these serious risks, and the fact that the Company had already been fined for noncompliance in two states, the Company continued to tout its operational accomplishments to artificially inflate its stock price because it was planning two follow-on equity offerings to raise capital.

The Company’s compliance problems were exposed by The Wall Street Journal in an April 12, 2004 article headlined “Moving the Market — Tracking the Numbers / Outside Audit: NovaStar’s Rise Has Ring of Deja Vu — Lender’s Licensing Woes In Nevada, Other States May Flag Larger Concerns.” In response to the announcement, the price of NovaStar common stock plummeted precipitously, closing at $37.50 per share on April 12, 2004, down from $54.18 per share on April 8, 2004 (the last trading day before the disclosure) — a one day drop of 30.7% on unusually high trading volume.

If you bought the securities of NovaStar, or sold NovaStar put options between October 29, 2003 and April 11, 2004 and sustained damages, you may, no later than June 14, 2004, request that the Court appoint you as lead plaintiff. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as “lead plaintiff.” Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Milberg Weiss Bershad & Schulman LLP, or other counsel of your choice, to serve as your counsel in this action.

Milberg Weiss Bershad & Schulman LLP ( is a firm with over 100 lawyers with offices in New York City, Los Angeles, Boca Raton, Delaware, Seattle and Washington D.C. and is active in major litigations pending in federal and state courts throughout the United States. Milberg Weiss has taken a leading role in many important actions on behalf of defrauded investors, consumers, and others for nearly 40 years. Please contact the Milberg Weiss website for more information about the firm. If you wish to discuss this action with us, or have any questions concerning this notice or your rights and interests with regard to the case, please contact the following attorneys:

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