Public stock trading is built on the trust of companies’ public statements. According to the complaint for this class action, Eco Science Solutions, Inc. appears to have deserved less trust in its public statements than most.
The class for this action is all persons and entities who acquired the publicly-traded securities of Eco Science Solutions between May 1, 2017 and May 19, 2017.
Eco Science claims to provide technology-based solutions for the health, wellness, and alternative medicine industry.
In its May 1, 2017 Form 10-K annual report for the year ended on January 31, the company laid out vague plans to generate revenue in several ways, one being “strategic acquisitions that provide an accelerated time-frame to secure market share”. It said that the company would have opportunities “[d]ue to various hyper-growth trends in segments of the holistic health and wellness category”; and while it claimed that its management had “already identified several candidates” it also said it had “not budgeted an exact dollar amount for investment purposes in Strategic acquisitions over the next 12-month period.”
Four days later, it announced an intended acquisition, claiming to have signed a Letter of Intent with Ga-Du Bank, Inc. What was a health and wellness company meaning to do with a bank? It intended to “own and operate a financial banking division providing payment processing, cash management and financial services to customers in the cannabis industry.” The article was filled out with praise of the transaction from parties at the two companies.
A few weeks later, on May 22, 2017, the Securities and Exchange Commission (SEC) temporarily stopped trading of the company’s stocks. In part, it stated that it had done so “because of concerns regarding the accuracy and adequacy of publicly disseminated information concerning, among other things, [the company’s] proposed acquisition of Ga-Du Bank, Inc.”
The class action was filed during the temporary halt, which the complaint claims makes the company’s securities “worthless” and damaging investors.
The complaint claims that the company’s statements about its acquisition plan for Ga-Du “lacked veracity”, artificially inflated the company’s stock price, and were violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.