Investigation and pending securities fraud class action lawsuit against Agria Corporation and certain underwriters on behalf of common stock holders of Agria Corporation.
Agria engages in the research and development, production, and sale of upstream agricultural products in the People's Republic of China.
This securities class action alleges that alleges that Agria failed to disclose and misrepresented the following material adverse facts during its IPO:
(1) that Agria had failed to secure enforceable employment agreements with its Chief Operating Officer ("COO") and other key executives prior to its IPO;
(2) that Agria was in active negotiations with its COO and other key executives to provide multi-million dollar compensation packages in order to secure their future services (which were key to the Agria's future success);
(3) that these dramatically increased compensation expenses would materially impact the Agria's financial results going forward, specifically by increasing its general and administrative expenses, and decreasing its operating profit and margins;
(4) that, as a result of the above, Agria's financial results following its IPO would in no way be analogous to the financial statements provided in its Registration Statement;
(5) that the failure of Agria to successfully negotiate enforceable employment agreements with its COO and other key executives would significantly affect its ability to execute its stated operating strategies due to the executives' critical importance to Agria;
(6) that various accounting and payment issues, which existed at the time of the IPO, would subsequently prohibit Agria's auditors from completing its audit of Agria's financial statements; and
On November 6, 2007, Agria conducted its IPO. The IPO was a financial success for Agria and its selling shareholder, Brothers Capital Limited, as they raised over $282 million by selling 17,150,000 of the Company's securities to investors at a price of $16.50 per share. Then on April 7, 2008, after the close of the market, Agria shocked investors when it announced that its auditors were unable to begin their audit of Agria's financial statements for 2007 due to various accounting and payment issues. Agria warned that "given the substantial delay in the commencement of the audit process, there is a risk that Agria may not be able to file its Annual Report" on time, and retracted its previously provided guidance for the fourth quarter of 2007, and first quarter and full year of 2008. Agria also announced that its COO had resigned. Further, Agria disclosed for the first time that its Chief Executive Officer was actively involved in protracted compensation negotiations with the COO and other key executives. These executives stood to receive $18 million in cash and transfer of Agria shares (which represented 22% of Agria) so as to "provide incentive for their continuing service and align their interests with those of the shareholders." As Agria noted, payment of cash and/or shares to the COO and other executives "as compensation and incentive for their past and continuing services in connection with the proposed transaction will likely result in material compensation charges to Agria in the period in which the payment is made."
Upon the release of this news, shares of the Company's securities declined $3.34 per share, or almost 38 percent, to close on April 8, 2008 at $5.46 per share, on unusually heavy trading volume. This closing price on April 8, 2008 represented a cumulative loss of $11.04, or 66.9 percent, of the value of Agria's shares at the time of its IPO just months prior.
Name (Stock Symbol)
Agria Corporation (GRO)
Agria Corporation is a China-based agri-solutions provider. Currently it offers product such as corn seeds, sheep breeding products and seedlings.
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