According to the complaint, Plaintiff brings this action on behalf of all persons or entities who purchased or otherwise acquired shares of Nuverra common stock between August 6, 2012 and August 23, 2013, inclusive (the "Class Period"), seeking to pursue remedies under §10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"). The Exchange Act claims allege that Defendants engaged in a fraudulent scheme to artificially inflate the Company's stock price. As a result of the fraud described below, the Company has lost a substantial portion of its value.
Defendant Nuverra maintains principal executive offices in Scottsdale, Arizona. Nuverra purports to be an environmental solutions company that provides services to customers in energy and industrial end-markets. The Company states that its focus is on the delivery, collection, treatment, recycling and disposal of restricted solids, water, waste water, used motor oil, spent antifreeze, waste fluids and hydrocarbons.
Nuverra operates in approximately 70 locations across 26 states. On July 30, 2013, Nuverra issued a press release announcing certain preliminary financial results for the second quarter ended June 30, 2013. The Company disclosed disappointing revenue and EBITDA expectations for the quarter, which were substantially lower than analyst expectations. The Company blamed the shortfall, among other items, on lower than expected activity levels in the Company's shale solutions segment, unspecified operational issues in its Eagle Ford Shale area, and heavy demand in the Marcellus and Utica shales that required the Company to utilize subcontractors, resulting in lower overall margins. Nuverra revised its earnings and revenue downward, including adjustments to second quarter EBITDA of approximately $9.7 to $9.9 million.
The adjustments included non-recurring integration and corporate rebranding expenses of approximately $2.3 million and a charge of approximately $4.8 to $5.0 million related to the restructuring of business operations and cost culling initiatives in the legacy Heckmann Water Resources business segment.
On this news, Nuverra shares plummeted from a closing of $3.49 per share on July 29, 2013 to a closing of $3.04 per share on July 30, 2013, for a sharp decrease of approximately 13%. Nuverra stock had traded as high as $4.91 on September 17, 2012.
On August 23, 2013, Seeking Alpha published an article, entitled "Nuverra Environmental: A Sinking Ship With Default Risk," stating that investors "could lose 80+% of their investment over the next 12 months." The article alleged that, contrary to Nuverra's public representations during the Class Period, the Company had "yet to generate a positive operating profit," that Nuverra was misrepresenting itself as an environmental service company, that the Company's book value was "extremely deceptive" and that Nuverra was "over-levered with a liquidity crisis looming."
Following the publishing of the August 23, 2013 Seeking Alpha article, Nuverra shares dropped significantly again. However, on this news, Nuverra stock decreased approximately 11.76% per share, from $2.72 per share the previous trading session to close at $2.40 per share on August 26, 2013.
Plaintiff alleges that Defendants have fraudulently inflated Nuverra's stock price during the Class Period by disseminating materially false and misleading statements, and failing to disclose material information known or recklessly disregarded by Defendants, concerning the Company's true financial condition, operation and business prospects.
Specifically, throughout the Class Period, Defendants made false and misleading statements and/or failed to disclose: (a) that the Company was suffering from a severe liquidity crisis; (b) that the Company was experiencing a significant decline in its operational results, particularly in the Eagle Ford Shale area; (c) that as a result of the Company's poor financial performance, Nuverra's default risk materially increased and the Company faces potential defaults on its covenants; and (d) based upon the above, Defendants lacked a reasonable basis for their positive statements about the Company during the Class Period.
As a result of Defendants' wrongful acts, false and misleading statements and omissions about the Company's financial well-being and prospects, and the precipitous decline in the market value of the Company's securities, Plaintiff and other Class members have suffered significant losses and damages.
On June 23, 2015, the Court issued an Order granting defendants' motion to dismiss with prejudice and closing this case.