Covia Holdings Corporation f/k/a Fairmount Santrol Holdings Inc. Class Action Lawsuit
- Company Name
- Covia Holdings Corporation f/k/a Fairmount Santrol Holdings Inc.
- Stock Symbol
- Class Period
- March 15, 2016 to June 29, 2020
- Northern District of Ohio
The Covia Holdings Corporation f/k/a Fairmount Santrol Holdings Inc. class action lawsuit charges certain Covia and Fairmont Santrol executives with violations of the Securities Exchange Act of 1934 and seeks to represent purchasers or acquirers of Covia and/or Fairmount Santrol securities between March 15, 2016 and June 29, 2020, inclusive (the “Class Period”). The Covia class action lawsuit was commenced on December 10, 2020 in the Northern District of Ohio and is captioned Plagens v. Deckard, No. 20-cv-02744.
Covia purports to be in the business of minerals and materials solutions for the industrial and energy markets, including producing proprietary sand for use in fracking. On June 30, 2020, the New York Stock Exchange (“NYSE”) delisted Covia stocks, and now Covia’s shares trade over the counter under the ticker symbol “CVIAQ.” Prior to a merger with Unimin Corporation on or about June 2018, shares of Fairmount Santrol traded on the NYSE under the ticker symbol “FMSA.” On or about June 1, 2018, Fairmount Santrol and Unimin entered a strategic combination, whereupon Fairmount Santrol shareholders received approximately $0.73 in cash consideration and .2 shares of Covia for each share of Fairmount Santrol held. Any remaining Fairmount Santrol shares that could not be converted into a whole Covia share were redeemed for cash. On June 29, 2020, Covia/Fairmont Santrol announced it had filed for Chapter 11 bankruptcy in the United States Bankruptcy Court in the Southern District of Texas.
In the 2010s, fracking became widely accepted and brought the United States closer to energy independence. Sand, used as a proppant, is an integral component of fracking. Proppant sand became a growing business. In a competitive industry, Covia/Fairmont Santrol differentiated itself with its purportedly high-quality fracking sand. Covia/Fairmont Santrol marketed the new products to the biggest drillers. Drillers paid a premium at the time for specialized sand from Fairmount Santrol and other producers, seeking to improve output by any means. At its peak price in the mid-2010s, a type of sand that had grains coated with resin went for $250 a ton, a markup of $150 a ton over the cost of raw sand.
The Covia class action lawsuit alleges that, throughout the Class Period, defendants made false and/or misleading statements and/or failed to disclose that: (1) Covia/Fairmont Santrol’s proprietary “value-added” proppants were not necessarily more effective than ordinary sand; (2) Covia/Fairmont Santrol’s revenues, which were dependent on its proprietary “value-added” proppants, were based on misrepresentations; (3) when Covia/Fairmont Santrol insiders raised this issue, defendants did not take meaningful steps to rectify the issue; and (4) as a result, defendants’ statements about Covia/Fairmont Santrol’s business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.
On March 22, 2019, Covia/Fairmont Santrol revealed that it had received a subpoena from the U.S. Securities and Exchange Commission (“SEC”) investigating certain value-added proppants On this news, Covia/Fairmont Santrol’s share price fell nearly 7%.
On November 6, 2019, Covia/Fairmont Santrol revealed that, in addition to the earlier SEC subpoena, additional information was requested and subpoenaed regarding current and former employees. On this news, Covia/Fairmont Santrol’s share price fell an additional 4.3%.
Then on June 29, 2020, Covia/Fairmont Santrol announced that it had entered into a comprehensive restructuring agreement with lenders and voluntarily filed petitions under Chapter 11 of the United States Bankruptcy Code to implement the agreement.
Finally, on June 30, 2020, the NYSE delisted Covia/Fairmont Santrol, stating in part that “the Company is no longer suitable for listing . . . after the Company’s June 29, 2020 disclosure that the Company filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code.” On this news, Covia/Fairmont Santrol’s share prices fell more than 37%, damaging investors.
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