On Friday, a securities holder filed a class-action complaint in the Central District of California against commercial drone company AgEagle Aerial Systems, Inc. and some current and former executives and board members for purported securities violations, alleging they made false and misleading statements to investors about a large partnership.
According to the complaint, the putative class action is being brought on behalf of “persons or entities who purchased or otherwise acquired publicly traded AgEagle securities between September 3, 2019 and February 18, 2021.”
Specifically, the plaintiff pointed to the company’s press release issued September 3, 2019, which notes that the company was “actively pursuing expansion opportunities within the Drone Logistics and Transportation market, and reported that it had received its first purchase order from a major unnamed ecommerce company to manufacture and assemble (unmanned aerial vehicles) UAVs designed to meet the critical specifications for drones that are meant to carry goods in urban and suburban areas.” The plaintiff also pointed to the annual report on Form 20-K with the Securities and Exchange Commission (SEC) filed on April 13, 2020, and an April 15, 2020, press release claiming that there were follow-up commercial drone orders.
The plaintiff stated that on April 29, 2020, “news broke of a video posted on the personal website and YouTube channel” of the daughter of one of the defendants, which purportedly “showed how to safely unbox the drones, and included the logos of AgEagle and Amazon side-by-side.” According to the plaintiff, the video was removed, but there remain various copies and screenshots on the Internet. The news of this video allegedly “led to widespread speculation that AgEagle’s ‘major unnamed ecommerce’ partner was in fact Amazon, causing AgEagle stock to skyrocket from an opening price of $0.95 on April 29, 2020 to as high as $5.15 in intraday trading on April 30, 2020.”
Moreover, the plaintiff said investors were also led to believe the AgEagle partnered with Amazon because one of the defendants “released a letter to shareholders announcing the Company’s expansion to a facility in Wichita, Kansas” to increase manufacturing “‘capacities and proficiencies.’” Speculation over the alleged partnership grew “with many pointing out the proximity between AgEagle’s new facility and Amazon’s new distribution center.” The plaintiff claimed that AgEagle “continued to exploit the Amazon rumor for its own gain” in a September 2020 investor presentation filed with the SEC. However, the defendants “attempted to hide behind a contractual non-disclosure agreement in resisting calls to identify the ecommerce company with which it had partnered.”
Nevertheless, the plaintiff averred that the defendants’ statements, including those in its filings, were materially false or misleading because they allegedly misrepresented and failed to disclose important information “pertaining to the Company’s business, operations and prospects, which were known to Defendants or recklessly disregarded by them.” In particular, the defendants made false or misleading statement, misrepresentations, or omissions that: “(1) AgEagle did not have a partnership with Amazon and in fact never had any relationship with Amazon; (2) rather than correct the public’s understanding about a partnership with Amazon, Defendants were actively contributing to the rumor that AgEagle had a partnership with Amazon; and (3) as a result, Defendants’ statements about AgEagle’s business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times.”
The plaintiff asserted that the truth began to emerge on October 14, 2020 and a February 18, 2021, report called it as “‘pump & dump scheme…to defraud US investors.’” The defendants are accused of violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the same Act.
The plaintiff seeks class certification, an award for damages, an award for costs and fees, and other relief. The plaintiff is represented by The Rosen Law Firm, P.A.