Eros International Plc., a New Jersey-based Hindi film distribution company, has been slapped with a class action lawsuit for allegedly “defrauding investors” by overstating its performance and for violating federal securities laws.
According to the lawsuit filed in United States District Court for the District of New Jersey Nov. 17, a copy of which was obtained by News India Times, named as the plaintiff is Mathew Abram who filed the class action individually and on behalf of all others similarly situated. The plaintiffs are demanding a jury trial.
But a NorthJersey.com report identified a shareholder Rajiv Sharma as the person who filed the suit on behalf of several other shareholders. Shares of Eros, which has its U.S. executive offices in Secaucus, New Jersey, plummeted after Alpha Exposure, part of the online equity research firm Seeking Alpha,
published reports by an anonymous author this fall questioning some of the revenue, cash flow and filmrelease figures the company had disclosed. According to NorthJersey.com, Eros has described the reports as “false rumors” and “misinformation.” According to the court document, Eros made false or misleading statements and “failed to disclose material adverse facts.”
Abram bought Eros shares and suffered losses like many others, including Sharma. The NorthJersey.com report said that Sharma paid as much as $32.94 a share this summer for Eros stock, and received only $9.44 a share when he sold shares in November, after the publication of the articles.
NorthJersey.com said that while it could not reach Eros for comments, the company retained Manhattan law firm Skadden, Arps, Slate, Meagher & Flom LLP to do “an independent internal review.” The lawsuit names as defendants among others, Kishore Lulla, the company’s
executive chairman, who served as a director since 2005 and was the Company’s CEO from June 2011 to May 2012, Jyoti Deshpande, its CEO, who has served in that role since June 2012 and is the signatory on the company’s 2014 and 2015 Form 20-F filings, and Prem Parameswaran, its CFO who has served in that role since June, 2015. Founded in 1977, Eros, which is incorporated in Isle of Man, has helped produce some of the highest-grossing Bollywood films, including “Om Shanti Om” and “Love Aaj Kal.”
The company, which raised $55 million in a 2013 stock offering, reported Nov. 17 net income of $11 million for the quarter ending Sept. 30, up from $4.3 million in the yearearlier period.
“It was ‘a blockbuster quarter’, NorthJersey.com quoted Eros CEO Jyoti Deshpande as having said at the time,”. It added that shares were down 5 cents Dec. 21 at $9.22 and are off 56 percent for the year. “The Individual defendants each had a duty to dissemi
nate prompt, accurate and truthful information with respect to the company’s financial condition and performance, growth, operations, financial statements, business, markets, management, earnings and present and future business prospects, and to correct any previously-issued statements that had become materially misleading or untrue, so that the market price of the Company’s publicly-traded securities would be based upon truthful and accurate information,” according to the lawsuit.
“The Individual Defendants’ misrepresentations and omissions during the class period violated these specific requirements and obligations,” the lawsuit alleged. It charged that the defendants “engaged in a scheme to deceive the market and a course of conduct that artificially inflated the company’s stock price, and operated as a fraud or deceit” on acquirers of the company’s stock.
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