Patriot National, Inc.
- Company Name
- Patriot National, Inc.
- Stock Symbol
- Class Period
- January 15, 2015 and November 22, 2017, including in connection with the January 15, 2015 initial public offering
- Motion Deadline
- March 30, 2018
- Southern District of Florida
The complaint charges certain officers and directors of Patriot National, Inc. (“Patriot”), the underwriters of Patriot’s January 15, 2015 initial public offering (“IPO”) and Patriot’s accounting firm with violations of the Securities Exchange Act of 1934 and/or Securities Act of 1933. Patriot is a provider of comprehensive technology and outsourcing solutions that help insurance companies and employers mitigate risk, comply with complex regulations and save time and money.
On January 15, 2015, the registration statement for the IPO was declared effective by the SEC and Patriot filed the prospectus for the IPO pursuant to which 7.35 million shares of Patriot stock were sold to the public at $14 per share for proceeds of $102.9 million.
The complaint alleges that during the Class Period and in the registration statement and prospectus issued in connection with the IPO, defendants intentionally withheld information regarding Patriot’s key customer, Guarantee Insurance Company, Inc. (“GIC”), a company controlled by Steven M. Mariano (“Mariano”), Patriot’s Chairman, President, CEO and controlling shareholder. Even though GIC was responsible for 60% to 70% of Patriot’s income and revenue, and was identified as critical for Patriot’s future growth, defendants failed to disclose that GIC was on the brink of failure throughout the Class Period and that, to avoid insolvency, it was dependent on repeated loans and capital contributions by Mariano. Mariano, in turn, used his position as controlling shareholder of Patriot to extract money for himself that he used to support a lavish lifestyle and prop up GIC. Meanwhile, Patriot continued to fully recognize revenue based on its contracts with GIC, even though it had no reasonable expectation of ever being paid in full. As a result of these false statements and/or omissions, Patriot securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high on more than $18 per share.
On March 3, 2017, Patriot filed a Form 8-K with the SEC announcing an agreement between GIC, Mariano and one of his controlled companies that partially revealed the extent of GIC’s precarious financial condition and the threat of regulatory supervision. On this news, the price of Patriot stock dropped from $4.60 per share to $3.67 per share on March 6, 2017. On March 17, 2017, the price of Patriot stock fell again, to $2.25 per share, on Patriot’s filing of a Form NT 10-K stating that Patriot would be unable to file its annual report on Form 10-K in a timely manner.
Then on November 22, 2017, Patriot announced that GIC had been placed into receivership on November 13, 2017, and that “a major portion of [Patriot’s] revenue and cash flow going forward will cease.” Patriot also announced that it had “notified approximately 250 employees, representing approximately one-third of its workforce, of the immediate termination of their employment.” This news caused the price of Patriot stock to fall from $1.00 per share to $0.36 per share, a one-day decline of 64%, and a decline of more than 97% from the price at which the shares were sold to the public in the IPO.