A New York court has removed a cloud of uncertainty swirling above Vancouver-based sugar-substitute producer GLG Life Tech Corp.
The producer and international supplier of the sweetener stevia (TSX:GLG) announced February 3 that the United States District Court for the southern district of New York dismissed a class action lawsuit against it and two officers, CEO Luke Zhang and CFO Brian Meadows.
In granting GLG’s motion to dismiss the class action, the court held that GLG had previously disclosed “substantial information [to] the market that suggested precisely that which plaintiffs alleged defendants failed to disclose” under the United States securities laws.
The company still faces a class action lawsuit in B.C. but GLG spokesman Stuart Wooldridge downplayed the significance of that lawsuit because, he told Business in Vancouver, it “is an absolute copy-cat filing, right down to the typos in the original complaint.”
The proposed class action lawsuits had alleged that GLG executives misrepresented material facts and failed to make timely disclosures to investors.
Class action lawsuits launched over allegations of corporate misrepresentations are rare, but lawyers told BIV when the cases were filed that this kind of lawsuit has the potential to become more common because B.C. changed its Securities Act in 2008 to allow this kind of action.
The lesson for executives, they say, is to ensure management can justify all future revenue and profit projections and to immediately disclose events that jeopardize what the industry calls "forward looking statements."
The TSX halted GLG's shares between May 2012 and July 2013. Shares rose 9.26% to $0.59 on February 3 on news of the dismissed lawsuit.
Adjusted for a 2009 stock split, GLG shares touched what would have been a high of about $20 in 2008.
