Eros International PLC
- Company Name
- Eros International PLC
- Stock Symbol
- Class Period
- July 28, 2017 to June 5, 2019
- Motion Deadline
- August 20, 2019
- District of New Jersey
The complaint charges Eros and certain of its officers with violations of the Securities Exchange Act of 1934. Eros, a global leader in the Indian entertainment industry, was founded in 1977 and is one of the oldest companies in the Indian film industry to focus on the international market. The Company co-produces, acquires and distributes Indian-language films in multiple formats worldwide.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding the Company’s business and operations. Specifically, defendants failed to disclose that Eros and its executives were engaged in a scheme to use related-party transactions to fabricate receivables, which were then reported in Eros’s public financial disclosures, and as a consequence, Eros’s financial position was weaker than disclosed and its Indian subsidiary, Eros International Media Ltd. (“Eros Media”), would miss loan payments and have its credit downgraded. As a result of this information being withheld from the market, Eros securities traded at artificially inflated prices during the Class Period, with its share price reaching a high of $16.
On June 5, 2019, CARE Ratings, India’s second largest credit ratings agency, downgraded Eros Media’s credit rating to “Default” because of “ongoing delays/default in debt servicing due to [a] slowdown in collection from debtors.” On June 6, 2019, Eros issued a press release admitting that Eros Media was late on two loan interest payments due in April and May 2019. On this news, the price of Eros shares fell $3.59 per share, or over 49%, to close at $3.71 per share on June 6, 2019.
The following day, before the market opened, Hindenburg Research published an article explaining the reason for CARE Ratings’ downgrade of Eros Media. The article stated, among other things, that “a significant portion of Eros’s receivables don’t exist” and that Hindenburg had documented “multiple undisclosed related-party transactions that appear designed to hide receivables.” On this news, the price of Eros shares fell another $0.41 per share, or over 11%, to close at $3.30 per share.