Net 1 UEPS Technologies, Inc. Class Action Lawsuit
- Company Name
- Net 1 UEPS Technologies, Inc.
- Stock Symbol
- Class Period
- September 12, 2018 to November 8, 2018
- Southern District of New York
On December 5, 2019, the Net 1 UEPS Technologies, Inc. class action lawsuit was filed charging Net 1 UEPS Technologies (“Net 1 UEPS”) and certain of its officers with violations of the Securities Exchange Act of 1934. The Net 1 UEPS class action lawsuit was commenced in the Southern District of New York on behalf of purchasers of Net 1 UEPS securities between September 12, 2018 and November 8, 2018 (the “Class Period”) and is captioned Baldwin v. Net 1 UEPS Technologies, Inc., et al., No. 19-cv-11174.
Net 1 UEPS provides transaction processing services, financial inclusion products and services, and payment and cryptographic technology. Net 1 UEPS’s principal platform is the Universal Electronic Payment System, which uses decentralized and biometrically secure smart cards. In addition, Net 1 UEPS offers telecommunication products such as prepaid airtime on behalf of all network operators in South Africa and owns 55% of the largest distributor of starter packs for the third largest network, Cell C (Pty) Ltd. (“Cell C”).
The Net 1 UEPS class action lawsuit alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Net 1 UEPS’s business and operations. Specifically, defendants failed to disclose that Net 1 UEPS lacked effective internal control over financial reporting and, as a consequence, Net 1 UEPS had misclassified its investment in Cell C and its financial statements for fiscal year 2018 overstated its income. As a result of this information being withheld from the market, Net 1 UEPS securities traded at artificially inflated prices during the Class Period, with Net 1 UEPS’s stock trading at more than $8 per share.
Then on November 8, 2018, after the market closed, Net 1 UEPS announced that its Audit Committee had concluded that “the Company’s consolidated financial statements for the year ended June 30, 2018 . . . should be restated, and that such consolidated financial statements . . . should no longer be relied upon, due to the Company’s re-evaluation of the classification of its investment in Cell C.” According to Net 1 UEPS, although Net 1 UEPS “elected the fair value option on acquisition of its investment in Cell C . . . the investment was incorrectly presented as available-for-sale and the change in its fair value of $25.2 million . . . was incorrectly recorded in other comprehensive income for the year ended June 30, 2018. The investment in Cell C should have been accounted for at fair value with changes in fair value recorded in the statement of operations.” On this news, the price of Net 1 UEPS shares declined $2.16 per share, or more than 30%, to close at $4.84 per share on November 9, 2018.
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