NEW YORK–(BUSINESS WIRE)–Today, prominent investor rights law firm Bernstein Litowitz Berger & Grossmann LLP (“BLB&G”) filed a class action lawsuit alleging violations of federal securities laws in district court of the Eastern District of New York against Clarivate Plc (“Clarivate” or the “Company”) and certain of the Company’s current and former senior executives (collectively, the “Defendants”). The Complaint extends the remedy period that was asserted in a securities-related class action lawsuit previously filed against Clarivate captioned Parot v Clarivate PlcNo. 1:22-cv-00394 (EDNY), and is brought on behalf of investors who suffered damages while purchasing shares of Clarivate common stock between November 10, 2020 and February 2, 2022 inclusive (the ” appeal period”).
BLB&G filed this action on behalf of its client, Boynton Beach Firefighters’ Pension Fund, and the case is captioned Boynton Beach Firefighters Pension Fund v Clarivate Plc, no. 1:22-cv-01371 (EDNY). The complaint is based on a thorough investigation and careful assessment of the merits of this case. A copy of the complaint is available on the BLB&G website by clicking here.
Clarivate alleged fraud
Clarivate provides subscription-based, technology-based analytical tools and services for the discovery, protection and commercialization of scientific research and innovations. The Complaint alleges that, throughout the Class Period, Clarivate repeatedly assured investors that the Company’s financial statements were true and accurate in all material respects and that its internal financial reporting controls and procedures were effective, while simultaneously issuing positive financial guidance. Indeed, even after Clarivate acknowledged in April 2021 that it had a material weakness in its internal financial controls and restated its 2020 Annual Report in May 2021 due to irregularities in the Company’s accounting, Clarivate limited the extent of this material weakness to its accounting for warrants. issued as part of the 2019 business combination by which Clarivate became a public company, while reassuring investors of the effectiveness of the rest of its controls.
In reality, however, the company incorrectly accounted for nearly $200 million in stock-based compensation expense as part of its accounting for its October 1, 2020 acquisition of intellectual property software company, CPA Global ( the “Global CPA Transaction”), and as a result, Clarivate materially overstated, among other things, its net earnings for the year ended December 31, 2020 and the nine months ended September 30, 2021. Further, given that Clarivate’s 2021 earnings forecast was based on the incorrect accounting for the stock-based compensation plans that Clarivate supported as part of the global CPA transaction, the Company had no reasonable basis to issue the guidance . Further, Clarivate knew, or at least recklessly neglected, that it did not have adequate and effective disclosure controls and procedures due to material systemic weaknesses in the Company’s internal control over financial reporting. As a result of these misrepresentations, shares of Clarivate traded at artificially inflated prices during the Class Period.
The truth began to emerge on December 27, 2021, when Clarivate disclosed that its financial statements for the fiscal year ended December 31, 2020 and the quarterly periods ended March 31, June 30 and September 30, 2021 “should no longer be relied upon” . due to an error in these financial statements” and should be restated. Specifically, Clarivate disclosed that it incorrectly included $185 million of expenses related to stock-based compensation awards to eligible CPA Global employees as part of the accounting for the acquisition of the CPA Global transaction, at instead of accounting for the expense for the majority of these awards as stock-based actions. compensation expense over the 12-month vesting period from Oct. 1, 2020 to Oct. 1, 2021. The company also said it expects “to report additional material weakness following an analysis of the cause of these restatements.”
Later in the day, shortly before the market closes, StreetInsider.com published an article reporting that a Stifel analyst had lowered its price target on Clarivate from $32.00 per share to $29.00 per share. The analyst also noted the suspicious timing of Clarivate’s revelations about its incorrect accounting for the global CPA transaction, which came less than a month after the former CFO of Clarivate resigned, and determined that the accounting irregularities of the Company are likely to impact Clarivate’s previously reported earnings and cash flow. .
Then, on February 3, 2022, Clarivate filed restated financial statements for the year ended December 31, 2020 and for the three quarters ended March 31, June 30 and September 30, 2021, which impacted, among other things, on the company’s GAAP income from operations, net income and earnings per share. Clarivate also disclosed that its net profit for 2021 “will be significantly lower” than its previously published guidance “due to the impact of restatements.” Indeed, in the first three quarters of 2021, Clarivate suffered a net loss that was nearly double what it had previously told investors. Additionally, the Company admitted that “material weaknesses in internal control over financial reporting existed as of December 31, 2020.” Following these revelations, Clarivate’s share price fell precipitously.
The filing of this action does not alter the previously established time limit for seeking appointment as lead plaintiff. In accordance with the notice of January 24, 2022 published as part of the parrot Under the Private Securities Litigation Reform Act of 1995, investors who purchased or otherwise acquired securities of Clarivate during the Class Period may, on or before March 25, 2022, apply to be named as lead plaintiff for the appeal. Any member of the proposed class may seek to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain a member of the proposed class.
If you wish to discuss this action or have any questions regarding this notice or your rights or interests, please contact Scott R. Foglietta of BLB&G at 212-554-1903, or by email at [email protected]
BLB&G is widely recognized around the world as a leading law firm advising institutional investors on matters relating to corporate governance, shareholder rights and securities litigation. Since its founding in 1983, BLB&G has built an international reputation for excellence and integrity and has pioneered the use of the litigation process to achieve unprecedented governance reforms. Unique among its peers, BLB&G has secured many of the largest and largest title recoveries in history, recovering over $33 billion on behalf of defrauded investors. More information about the firm can be found online at www.blbglaw.com.