Hongwei Li bought stock in SciPlay, a digital game developer, that can be traced to the company’s IPO. A complaint was filed against SciPlay Corporation and a list of other defendants by Li on behalf of himself and other individuals who bought the stock, accusing the company of violating §§ 11 and 15 of the Securities Act of 1933 (Hongwei Li v. SciPlay Corporation et al 657309/2019). The plaintiff is bringing the case as a class action, where members of the class purchased SciPlay stock in relation to misrepresentative documents available at the time of the IPO. The complaint cites publicly available documents: a review of documents filed by SciPlay to the United States Securities and Exchange Commission (SEC), reports by the company pursuant to securities, press releases from the company, and media reports as evidence toward these violations. They also suspect further evidence will be uncovered during discovery. The complaint states that the accusations are only about negligence and liability and not about fraud, knowledge, recklessness, or intentional wrongdoing.
The claim of negligence and liability comes from the Registration Statement and Prospectus that was issued alongside the IPO, which the plaintiff claims were materially misleading and omitted important information relevant to the financial standing of the business. SciPlay was suffering financially just prior to its IPO, due to the fact that they were having software problems which resulted in a lower number of active users and a predictable negative impact on the company’s next quarter. This is information that SciPlay failed to disclose before the IPO despite being required to do so by Item 303 of Regulation S-K. 17 C.F.R. §229.303(a)(3)(ii) and Item 105 of SEC Regulation S-K, 17 C.F.R. §229.105.
During the IPO, 22,720,000 shares of SciPlay were sold to the public for $16.00 each. The quarterly report following the IPO honestly reported the drop in active users and the software problems which then caused the value of SciPlay’s stock to drop by 46.56% to $7.45 per share. SciPlay used the money from the IPO to buy an economic interest in SciPlay Parent from Scientific Games. Scientific Games is one of the other defendants in the case and is the controlling stockholder in the company. Other defendants include SciPlay’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and many other company executives who were materially involved in the IPO, as well as Merrill Lynch, J.P. Morgan Securities, Goldman Sachs, and other financial institutions. The complaint lays out how the company and its executives should have been aware of and known to inform potential investors of the financial setbacks it was facing, in order to categorize the action as negligent.
The complaint asks for certification of the plaintiff as the class representative, compensatory damages for all members of the class in an amount to be decided at trial, attorney’s fees, expert fees, other costs, and injunctive relief. Hongwei Li and the class, if it is certified, are being represented by Levi & Korsinsky. The complaint was filed in the Supreme Court of the State of New York along with a summons for the 20 defendants.
