The original Complaint charges Agria Corporation and certain of its officers and directors with violations of the Securities Act of 1933. Agria engages in the research and development, production, and sale of upstream agricultural products in the People's Republic of China.
More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company had failed to secure enforceable employment agreements with its Chief Operating Officer ("COO") and other key executives prior to its IPO; (2) that the Company 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 Company's future success); (3) that these dramatically increased compensation expenses would materially impact the Company'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, the Company'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 the Company 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 the Company; (6) that various accounting and payment issues, which existed at the time of the IPO, would subsequently prohibit the Company's auditors from completing its audit of the Company's financial statements; (7) that the Company lacked adequate internal and financial controls; and (8) that, as a result of the foregoing, the Company's Registration Statement was false and misleading at all relevant times.
On November 6, 2007, the Company conducted its IPO. In connection with its IPO, the Company filed a Registration Statement with the SEC. The IPO was a financial success for the Company 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 the Company's financial statements for 2007 due to various accounting and payment issues. The Company warned that "given the substantial delay in the commencement of the audit process, there is a risk that the Company 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. The Company also announced that its COO had resigned. Further, the Company 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 Company shares (which represented 22% of the Company) so as to "provide incentive for their continuing service and align their interests with those of the shareholders." As the Company 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 the Company 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 the Company's shares at the time of its IPO just months prior.
On December 3, 2009, Judge William H. Pauley, III, granted the motion to consolidate the related cases, to appoint Nijat Tonyaz as lead plaintiff and to approve lead plaintiff’s choice of lead counsel. On February 3, 2009, the plaintiff filed a Consolidated Amended Class Action Complaint, adding certain company directors as named defendants. On March 20, 2009, the defendants responded by filing a motion to dismiss the Consolidated Amended Class Action Complaint.
On November 30, 2009, Judge William H. Pauley, III signed the Memorandum and Order granting Agria and the Underwriter Defendants’ motion to dismiss the First Amended Consolidated Class Action Complaint. The Clerk’s Judgment was entered on December 1, 2009. The Court will hold a conference with the parties to discuss the individual defendants' proposed motion to dismiss on December 18, 2009. On December 14, 2009, the plaintiff filed a motion for reconsideration of the Memorandum and Order.
On December 28, 2009, a Second Consolidated Amended Complaint was filed. The defendants responded by filing a motion to dismiss the Second Consolidated Amended Complaint on February 11, 2010.
According to the Stipulation and Consent Order signed by Judge William H. Pauley, III, on June 30, 2010, it is hereby Stipulated by the parties, that the settlement amount of $3.75 million be deposited into an interest-bearing CRIS account bearing the name In re Agria Corporation Securities Litigation, Civil Action No. 1;08-cv-3536 (WHP).
On August 9, 2010, the plaintiff filed a motion for preliminary approval of the settlement. The motion was preliminarily approved on September 29, 2010. The settlement hearing will be held on January 21, 2011.
On June 7, 2011, the settlement was approved and the case was dismissed with prejudice. According to the order awarding attorneys' fees and expenses, The Court hereby awards Lead Counsel attorneys' fees of 25% of the Settlement Fund, or $937,500, plus litigation expenses in the amount of $43,506.31, together with the interest earned on both amounts for the same time period and at the same rate as that earned on the Settlement Fund until paid.