Alliance MMA, the organization touting itself as “the only mixed martial arts promotion company that is publicly-traded” with industry-name directors Renzo Gracie and Burt Watson, was sued for securities law violations in a class-action lawsuit filed in New Jersey Federal Court today. CEO Paul Danner and CFO John Price are also listed as defendants.
Alliance went public on the NASDAQ stock exchange on Oct. 6, 2016 with an IPO offering price of $4.50 per share. As of this writing, Alliance was trading at $2.12, a 53% decline in value.
Last Wednesday, Alliance filed an 8-K with the Securities and Exchange Commission (SEC) stating that certain prior financial statements “should no longer be relied upon because of an error in recognizing as compensation transfers of common stock by an affiliate of the Company to individuals who were at the time of transfer, or subsequently became, officers, directors or consultants of the Company.” The plaintiff, Eric Shapiro, claims he and other class members suffered significant losses due to defendants “wrongful acts and omissions.”
This comes on the heels of Alliance filing a Form 12b-25 Notification of Late Filing with the SEC on Mar. 31 explaining why its required annual 10-K disclosure could not be completed on time due to “efforts to resolve certain matters relating to non-cash compensation expenses” from before the IPO.
Per Investopedia, this is cause for concern. “The SEC Form 12b-25 is usually a red flag for investors, indicating that something is not right with a company. It either means that management is incapable of ensuring that basic tasks are performed or that the company is experiencing major financial trouble.”
So which is it, major financial trouble or incapable of performing basic tasks? Bloody Elbow had begun a story on Alliance MMA prior to the filing of the current lawsuit and will have more as soon as available.
Paul is Bloody Elbow’s analytics and business writer. Follow him @MMAanalytics.