Alliance MMA sued by investor
April 19, 2017
An investor has filed a lawsuit against Alliance MMA for alleged violations of securities law and is seeking class action status. The Complaint was filed in the U.S. District Court of New Jersey on Monday.
The lawsuit was filed just days after Alliance MMA issued an 8-K which reports to investors of specific events which may impact the company. Alliance MMA is a publicly traded stock company on the NASDAQ exchange. It had its initial public offering this past October.
The 8-K issued on April 7, 2017 states:
On April 7, 2017, the Board of Directors of Alliance MMA, Inc. (the “Company”) concluded that the condensed consolidated financial statements for thenine months ended September 30, 2016 included in the Company’s Form 10-Q for the quarter ended September 30, 2016 and for the three and six months ended June 30, 2016 should no longer be relied upon because of an error in recognizing as compensation transfers of common stock by an affiliate of the Company to individuals who were at the time of transfer, or subsequently became, officers, directors or consultants of the Company. The Company plans to include in its annual report on Form 10-K for the year ended December 31, 2016 revised financial information for the nine months ended September 30, 2016 and for the three and six months ended June 30, 2016. The Company’s chief financial officer has discussed the determination to restate these financial statements with its independent accounting firm.
As a result, the financial information previously provided to investors was not correct. A lawsuit was filed 10 days later.
Plaintiff is seeking class action status as they believe that there is potential other plaintiffs were affected by the information. Law firms are now seeking to sign up potential plaintiffs allegedly affected.
This is an interesting lawsuit and is a look into the intricacies of securities law. The stock is down as of this writing, trading at a 52-week-low, on the day it announced its 2016 financial results. The lawsuit could be seen as investors attempting to garner money from the company for its error. Whether or not there was reliance on the company’s will be key and plaintiffs (and potential plaintiffs) will likely argue that they reviewed Alliance MMA’s financial information prior to investing their money. Since the 8-K refuted the previous information, it certainly is a tough spot for the company.