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Morganti & Co., P.L.C. committed to European-based Investors

(August 10, 2018).  Morganti & Co., reminds European-based investors that Morganti & Co., is the European retail-investor shareholders’ North American law firm.  With extensive contacts in United States, Caribbean, Central America, and Europe, Morganti & Co., will be in England, Germany, Netherlands, and Panama prior to year-end meeting with clients and lawyers.

Andrew Morganti will be, providing an in-depth analysis at conferences in the England, Panama, and the United States relating to jurisdictional issues of North American courts relating to shareholder related claims.  Morganti & Co. currently represents European investors in the litigation involving Ayama, Inc., Barrick Gold, Inc., Deutsche Bank, AG., Guyana Goldfields, Inc., Ithaca Energy, Inc., Valeant Pharmaceuticals International, Inc., and Exxon Mobile Corp.

Q&A: Disclosure of Internal Investigations

(August 11, 2018). Morganti & Co has received several inquiries from investors as to when companies must disclose internal investigation. The following note is our Firm’s general approach.

Question: When does a reporting issue have the affirmative duty to disclose internal investigations?

The answer of this question should commence with examining whether the internal investigation is a material fact. Here, we are guided by Sharbern Holding Inc. v. Vancouver Airport Centre Ltd, 2011 SCC 23, paragraphs 59-61, as to whether a fact (e.g., such as an internal investigation) rises to a level of being an material fact requiring disclosure. Whether the management believes an internal investigation will not result in anything different than the then total mix of information about that particular topic concerning the investigation should not influence the company’s disclosure requirements. Kerr v. Danier Leather Inc., 2007 SCC 44, at paragraph 55.

In Pretium Resources, Inc., the mining company was conducting an internal investigation with a third-party engineering firm based upon adverse facts learned by its own employees and consultants. While the internal investigation was ongoing Pretium Resources released bullish statements about the topic of the investigation but omitted to disclose that it had been sitting on adverse facts about the topic and was engaging in an internal investigation. Management chose not disclose because it relied upon its business judgment to determine that the adverse facts did not appear reliable. (Decision at paragraph 15) The court released a decision following the guidance of Sharbern Holdings Inc. and Kerr finding that if the investor proceeded to a trial there would be reasonable possibility of success that the investor could establish that the internal investigation was a material fact requiring disclosure and, therefore, Pretium Resources violated its continuous disclosure requirements exposing itself to compensate investors for their losses. (Decision at 24). You may read the decision here.

Contrasting Pretium Resources, Inc., there is MDC Partners, Inc. MDC Partners was conducting an internal investigation because it was served with a subpoena from a securities regulator. When the securities regulator and corresponding internal investigation was disclosed several months later the market sold off the securities by over 28%. After a review of Sharbern Holdings, Kerr, that court extended the reading of Part IV of the Securities Act to apply to foreign securities regulators therefore not requiring MDC Partners to disclose the adverse fact that it was served a subpoena and conducing an internal investigation. (Decision at paragraphs 81-84 and, importantly 108). The court dismissed the plaintiff’s motion to proceed towards trial with the statutory claim and granted the motion to dismiss with the proceeding with prejudice. You may read the decision and order here [inset the same 2 documents from earlier]

Answer: Unless the internal investigation arises from being served with a subpoena from a domestic or foreign securities regulator, reporting companies, defined by the Ontario Securities Act, should make disclosure of an internal investigation when the company choses to release a statement(s) that concerns the same topic as the internal investigation. In making the timely disclosure the company can disclose the managements’ views as to why the internal investigation may or may not result in a certain manner. See, Pretium Resources, Inc., Decision at paragraphs 38-39.

Next month we will explore the meaning of an internal investigation.

A Lesson to Invest in Numbers not Emotions: Concordia International Corporation

(July 15, 2018). Dear Savvy Reader: Before you read any further, please look at the five (5) year chart for Concordia International Corp. (TSX: “CXR”).  The Company’s shares were trading over $100 and are now under $1.00.

This securities class action arises out of Concordia’s failure to disclose adverse material facts as well as misrepresentations relating to Concordia’s business model, growth platform, pro forma revenues and dividend payments in documents released from March 23, 2016 to August 11, 2016. On August 12, 2016, Concordia issued the Corrective Disclosure, in which its founder and former Chief Executive Officer announced that the Company was lowering its earnings guidance to reflect the impact of competition on several products in its North America segment as well as the effect of foreign exchange rates. In doing so, Concordia reduced its 2016 projected revenues from $1.02-1.06 billion to $859-888 million and reduced its adjusted EBITDA from $610-640 million to $510-540 million. The Corrective Disclosure also informed the public that Concordia’s Chief Financial Officer was stepping down and that the Company’s Board of Directors had unanimously agreed to suspend its $0.075/common share quarter dividend. As a result, Concordia’s stock price on the Toronto Stock Exchange fell roughly 54.1% within 10 trading days following the Corrective Disclosure.  Thereon after, the investment proposition

For several complex (legalize) reasons, including a recapitalization transaction that includes a private placement that liquidates existing shareholders down to less than 1% of the outstanding limited voting shares (and all options, warrants, rights and similar instruments were cancelled by the Ontario court), which we welcome discussing with you, the Canadian shareholder class action has resolved for USD $13.9 million and subject to court approval.  Bottom line, there are no winners here but, rather, everyone has lost here.  The situation simply underscores that Responsible Issuers should, and must, make disclosure of all material facts in a timely manner to investors so they can assess whether they want to continue holding the shares.

Investors seek certification of their fraud claim against Volkswagen AG

February 6, 2018. Quebec-based investors, represented by Morganti & Co. and Faguy & Co., made submissions to the court to exercise jurisdiction and certify the investor fraud claims against Volkswagen AG. The investors are seeking to represent other similarly situated investors that purchased Volkswagen AG’s securities on European and U.S. stock exchanges on the basis that Volkswagen AG intentionally mislead the public and its investors about the diesel scandal resulting in the share price and value being artificially high. On September 18, 2015, the truth about the diesel scandal became known and Volkswagen AG’s share price significantly dropped. The investors are seeking to recover the amount of the price drop. On July 10, 2018, Ontario-based investors will be making similar submissions to the Ontario court.

Andrew Morganti hits the Airwaves

February 3, 2018. Wolfgang Klein of HiFi Radio with The Wolf on Bay Street (640 Toronto) invited Andrew Morganti to explain how his Firm helps investors get money back from bad investments against domestic and foreign companies.

Morganti & Co. is successful in getting claims arising from a private placement certified

January 29, 2018.  The Firm was approached investors in a private placement offered by a small Toronto-based company. They allege that they were mislead as to management’s intention to co-invest and how the funds were going to be used.  Among the claims that were certified, the investors are seeking the return of their capital plus interest and the costs of the litigation.  “My client is very pleased that within less than one year of issuing the claim the causes of action have been certified.”

Morganti & Co., P.C. enters Bay Street Market for Associates’ Salaries

January 2, 2018.  Morganti & Co., P.C. has announced that it has increased first year associate base-salaries to $100,000, and has adopted a five-year track to become a principal at the Firm.   Eli Karp, the Firm’s newly elected principal and director, adds that the new compensation structure reflects a continued and thorough commitment to recruiting and hiring the most capable and insightful young lawyers willing to put in the extra mile for clients and other members of the Firm.

Morganti & Co., P.C. secures ruling that protects Canadian investors that purchase securities on foreign stock exchanges

December 20, 2017.  In Paniccia v. MDC Partners, Inc., et al, 2017 ONSC 7298, the Ontario Superior Court dismissed the defendants’ attempt to restrict the investor class to investors that purchased the shares domestically on the Toronto Stock Exchange.  Justice Perell agreed with the investors, and in doing so found the defendants’ expert Professor John Coffee Jr.’s evidence unhelpful, that the provincial laws were created to protect Canadian investors’ purchases of shares purchased on domestic and foreign stock exchanges.  Andrew Morganti, the Firm’s managing principal, states that “this outcome was consistent with the Firm’s previous success in Kaynes v. BP PLC, 2013 ONSC 5802 and 2016 ONCA 601.  The provincial courts recognize that Canadian investors need protection from foreign and multinational corporations that mislead them in investment decisions.  Simply put, Canada does not follow the U.S.’s Morrison v. National Australian Bank.”  The investors’ expert was Professor Adam Pritchard, University of Michigan Law School.

The investors are represented by Andrew Morganti, Eli Karp, and Hadi Davarinia.

Investors in Mining Stocks Strike Another Victory in Court

December 20, 2018. Morganti & Co., P.C. announces that the Ontario Divisional Court has denied the defendants’ motion to appeal Justice Belobaba’s decision granting the investors leave to proceed to advance to trial asserting their provincial Securities Act claim found at Wong v. Pretium Resources Inc., et al., 2017 ONSC 3361.

The Courts have concurred with Andrew Morganti’s opinion that a mining company cannot withhold adverse news about mining operations on the premise that management is optimistic that the adverse news may never come to fruition.

Andrew Morganti is now constructing a team of trial lawyers to co-represent the investors, regardless of residency, that purchased Pretium Resource’s securities between July 23 and October 9, 2013. Mr. Morganti adds that the trial lawyer team will include a few of the top trial lawyers across Canada.

“This is a great result for the global investor that purchases the securities of Canadian mining companies. With this law in place, the securities of Canadian mining companies should earn a premium on their valuations.”

Ontario Court certifies claim against Hycroft Mining Corporation

January 8, 2018.  The Ontario Superior Court of Justice released an order certifying a claim against Hycroft Mining Corporation (“Hycroft”) on behalf of all investors that purchased Hycroft’s pursuant to the May 9, 2013 secondary public offering. Lawyers Eli Karp and Hadi Davarinia are advancing the proceeding into discovery towards a trial of the common issues of whether Hycroft omitted material facts about the operational problems at the Lewis Leaching Pad from the prospectus associated with the Offering resulting in investors over paying for the securities offered by this prospectus.