US-based law firm Goldberg Law PC, which represents shareholders around the world and specialises in securities class actions and shareholder rights litigation, has decided to investigate claims of potential misrepresentations by Indian film production house Eros International Plc.
“The investigation focuses on whether the company and its officers violated securities laws by issuing misleading information to investors," Goldberg Law said in a press release posted on its website.
The investigation concerns whether Eros International has violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The law firm has also invited investors to contact the firm to discuss their legal rights in the case without any cost to them.
“On October 30 2015, a report was published on Eros asserting, among other things, that: (1) Eros’ reported earnings have overstated the economic reality of its business model; (2) Eros’ subsidiary financials reveal a lack of free cash flow and raise many questions about the company’s accounting; and (3) Eros has enriched its controlling family at the expense of shareholders through a series of related-party transactions. When the truth was revealed, shares dropped causing investors harm,” the law firm said in a note on its website.
In December, a section of investors in its US-listed unit Eros International Plc, which is listed on the New York Stock Exchange, had filed a class action lawsuit for securities fraud, alleging that the company made misleading statements or concealed information that affected its share price.
The suit, filed by law firm Lieff Cabraser Heimann & Bernstein LLP on behalf of the investors, alleged that the company’s controlling shareholders enriched themselves through related-party transactions and that the company lacked adequate internal controls. Besides, it alleged that Eros overstated the number of movies it distributed, its theatrical revenue as well as its financial results and operating metrics.
The lawsuit also said the company didn’t prepare its financial statements as per the Generally Accepted Accounting Principles, or GAAP.
Shares of Eros had been hit by a major sell off in October, triggered by a series of tweets by an anonymous person that questioned the company’s reporting norms and operating metrics. At the time, Eros had said the share price volatility was a result of speculative media reports.
After touching an all time high of Rs 644.40 a share in July last year, shares of Indian listed film studio arm Eros International Media Pvt Ltd have fallen around 70 per cent since then.
Founded in 1977, Mumbai-based Eros produces, acquires and distributes Indian language films in multiple formats worldwide. The firm has aggregated rights to more than 2,300 films in its library. It also holds digital-only rights for 700 additional films. Eros International is the first Indian media company to list on the New York Stock Exchange.
Eros as a group competes with 21st Century Fox, the media entertainment firm controlled by Rupert Murdoch that has its own movie production house besides owning TV network Star. Star also runs an over-the-top property HotStar, which also streams movies besides its television shows.
News Corp, another firm controlled by Murdoch, owns the parent of this news website.
On Tuesday, shares of Eros Media last traded at Rs 176.50, down 2.70 per cent on the Bombay Stock Exchange from its previous close in a strong Mumbai market.