The complaint for this securities class action makes clear that the Securities Exchange Act of 1934 requires honest reporting of all factors that could influence a company’s performance, including criminal activity. The events in question revolve around three related companies, a merger, and the actions of Shaul Elovitch, who was Chairman of the Board for all three companies.
The class for this action is all persons who acquired B Communications securities between November 7, 2013 and June 19, 2017.
B Communications Ltd. is an Israeli company that provides communications for business and private customers, such as telephone services, broadband Internet access, data transfer networks, technology, television and radio broadcasts, and so on.
B Communications is a subsidiary of Internet Gold–Golden Lines, which is a subsidiary of Eurocom Communications Ltd., which is owned by Shaul Elovitch. B Communications has a subsidiary of its own, Bezeq The Israel Telecommunication Corporation Limited. Elovitch is Chairman of the Boards of Eurocom, B Communications, and Bezeq and has exercised control over all three companies.
In 2013, Bezeq proposed a merger with its subsidiary, a satellite television operator popularly known as Yes. Bezeq held 49.8% of Yes, while Elovitch’s Eurocom held 50.2%.
The class period begins on November 9, 2013, with a press release saying that the Israel Antitrust Authority was considering the Bezeq/Yes merger, which it had previously objected to in 2009. A follow-up press release in March 2014 announced that, if the companies fulfilled certain terms, the merger would be allowed.
The merger was discussed again in a March 2015 press release that announced that the conditions had been satisfied and that shareholders had approved the merger. A June press release announced that the deal had been accomplished.
The company’s Form F-20 annual report for 2015 (filed on April 19, 2016) discussed the merger and mentioned two remaining contingency payments. Its Form F-20 annual report for 2016 (filed on April 26, 2017) summarized the merger and noted the consolidation of the companies’ financial statements.
Roughly two months later, on June 20, 2017, The Times of Israel reported that the Israel Securities Authority (ISA) had raided the offices of Bezeq, in an investigation of “suspicions of violating the securities law and the penal code related to transactions connected to” Elovitch; it also detained Elovitch. The Israeli publication Globes also reported that the ISA was investigating the Bezeq/Yes merger and payments made to Eurocom under pressure from Elovitch.
Following this news, the B Communications share price fell by 4.65%.
The complaint claims that the company violated the Securities Exchange Act of 1934 by not disclosing that Elovitch had taken illegal actions in the Bezeq/Yes merger and that the discovery of this conduct would invite regulatory scrutiny of B Communications or Bezeq.