Securities

When Rio Tinto, a UK mining and metals company, bought coal tenements (RTCM) in Mozambique for $3.7 billion, it had high hopes for the property. But, according to the complaint for this class action, almost immediately problems arose, which the company hid in order to inflate its stock price. The company could not transport the coal as it had wanted to, the coal reserves were smaller than believed, and the quality and mix of types of coal were worse, all of the which the complaint claims led to a negative valuation of RTCM. Still, the complaint claims, the company hid all of this and the truth did not emerge until February 2013.

On January 19, 2016, SCANA Corporation celebrated progress on the construction of its multi-billion-dollar V. C. Summer nuclear power station in Fairfield County, South Carolina. The press release announced the “achievement” of “milestones” and said that the “nuclear construction team concluded the year on a high note.” But according to the complaint for this class action, the impression of progress was false. SCANA continued for many months to insist that the project was on schedule, despite having a secret report indicating the opposite. When it finally announced the abandonment of the project, the state’s attorney general requested a criminal investigation into the project. The complaint alleges violations of the Securities Exchange Act of 1934 with scienter.

When the FDA granted Intercept Pharmaceuticals accelerated approval for its new liver drug Ocaliva (OCA), the company’s May 27, 2016 press release was optimistic. It quoted a past president of the American Association for the Study of Liver Diseases as saying, “Ocaliva fills an important unmet need for the many patients” with the liver disease PBC who have not responded to previous treatments. But according to the complaint, the outlook for OCA was a lot less hopeful. On September 21, 2017, the FDA issued a safety announcement warning about “serious liver injury with Ocaliva” even in “some patients with mild disease who are receiving the correct dose.” It spoke of nineteen deaths, of which seven had been caused by a “worsening of PBC disease”. It also said it had “identified 11 cases of serious liver injury with Ocaliva use.”

Cempra is a clinical-stage pharmaceutical company that has announced a proposed merger with Melinta Therapeutics. According to the complaint for this class action, however, the terms of the deal are not fair to Cempra stockholders. The complaint claims that little effort was made by Cempra to find other parties interested in a better deal and presents a chart showing Cempra’s significant growth over the past year. Now, the complaint alleges, the Proxy Statement omits significant information that would permit that stockholders to properly evaluate the fairness of the deal. According to the complaint, the omissions violate Sections 14(a) and 20(a) of the Securities Exchange Act of 1934.

Tesco Corporation’s plan of merger with Nabors Industries Ltd. was announced in August 2017. Under the arrangement, Tesco’s stockholders will receive 0.68 shares of Nabors stock for each share of Tesco stock that they currently own. In September, it filed a Preliminary Proxy Statement with the Securities and Exchange Commission (SEC), but according to the complaint for this class action, the Proxy is misleading because it does not disclose enough information. For example, the complaint alleges that the Proxy omits material information for the financial projections and forecasts prepared by Tesco management that financial advisor JP Morgan Securities used. In particular, the Proxy does not provide GAAP reconciliation for non-GAAP financial measures in the projections. All of these omissions, the complaint alleges, violate Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9.

On August 9, 2017, Starwood Waypoint Homes (SFR) entered into an agreement to merge with Invitation Homes, Inc. (INVH) that would entitle the holder of each common share of SFR to receive 1.6140 shares of common stock of INVH. Unfortunately, according to the complaint for this class action, the S-4 Registration Statement omits material information to an extent that renders it false and misleading. First, the complaint alleges that it leaves out a good deal of information related to SFR’s and INVH’s financial projections and valuation analyses. Second, the complaint claims that not enough is revealed about potential conflicts of interest with respect to the financial advisors.

At one time, Santander Securities, LLC (SSLLC) bought Puerto Rico Municipal Bonds for its own accounts. When the outlook for these Puerto Rican securities changed, however, it stopped its purchases and began to sell off its inventory, but the complaint for this class action alleges that it continued to recommend them to clients, concealing information to make sales. The complaint thus alleges that the substantial decrease in value of the PRMBs and PRCEFs was foreseeable by then, and that soliciting purchases from customers violated fiduciary and suitability duties, FINRA rules, federal and Puerto Rican securities laws, and laws against such things as fraud and negligence.

It’s not uncommon for stockholders to file a class action when the Proxy Statement for a proposed merger doesn’t contain enough information to allow them to fully assess the transaction. The complaint for this class action, however, claims that no Proxy Statement at all has been filed or sent to stockholders as of this action’s filing date of October 20, 2017, even though stockholders are scheduled to vote on the merger transaction on November 2. The complaint alleges that the failure to file a Proxy Statement is a violation of Section 14(a) of the Securities Exchange Act of 1934 and requests that the court stop Alcobra and Arcturus from going ahead with the transaction.

Rockwell Collins has entered into a merger agreement to be acquired by United Technologies Corporation (UTC), which would compensate stockholders with $93.33 in cash plus a portion of a share of UTC’s common stock. A Form S-4 Registration Statement was filed with the Securities and Exchange Commission (SEC) on October 10, 2017, but according to the complaint for this class action, the Statement does not contain sufficient information to allow stockholders to fairly assess the deal or understand potential conflicts of interest.

Skechers is a prominent footwear company which experienced rapid growth in 2013 and 2014. A dispute between dockworkers and shipping companies between June 2014 and February 2015 caused customers to shift their orders earlier, and the complaint for this class action alleges that the company knew it was giving investors a false picture in its projections of continuing growth because the growth generated by the earlier orders was unsustainable.