GreenSky investors have reached a $27.5 million settlement deal over allegations the lending technology company made misleading statements ahead of its initial public offering, according to documents filed in New York federal court.
A group of investors on Monday asked the court for preliminary approval of the deal, saying the two-year litigation had been hard-fought and the settlement amount was fair. The investors are led by Northeast Carpenters Annuity Fund, El Paso Firemen & Policemen's Pension Fund, and the Employees' Retirement System of the City of Baton Rouge and Parish of East Baton Rouge.
"The settlement represents a substantial portion of the potential provable damages suffered by the class," the filing said, adding the agreement was reached in mediation and "only after the settling parties and co-lead counsel were well informed as to the strengths and weaknesses of the claims and defenses."
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According to investors' November 2018 complaint, GreenSky failed to adequately disclose that it was moving away from the more profitable solar-energy loans, where it was able to charge higher upfront transaction fees, and toward industries with lower fees.
An updated, consolidated complaint filed in June 2019 described the shift as "core financial information" that had a "seismic effect" on the company's earnings, profitability and growth prospects.
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U.S. District Judge Alvin K. Hellerstein kept investors' claims alive in November 2019 following oral arguments, and the investors won certification as a class in June 2020.
The proceedings have included "extensive" discovery involving over 4.4 million pages of documents, six depositions, and subpoenas to outside parties such as auditors and consulting firms, Monday's filing said. The sides also went through mediation, ultimately settling on the $27.5 million figure in April, according to the filing.
The settlement amount reflects the risk of pursuing further litigation, in which the investors would have to overcome significant hurdles, the filing said.
"Although lead plaintiffs defeated the motions to dismiss, this was no guarantee as to continued success in the case," the filing said. "Even if lead plaintiffs established defendants' liability, lead plaintiffs would encounter significant loss causation defenses," in which the company and its executives would look to distinguish between losses caused by the allegedly false statements and losses due to other factors, the filing said.
"I believe this is a very good recovery for the class given the potential damages and risks of litigation, and hope the court will agree and ultimately approve the settlement later this year after notice is given to the class," Toll told Law360.
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The investors are represented by Steven J. Toll, S. Douglas Bunch, Jan Messerschmidt, Jessica (Ji Eun) Kim and Manuel J. Dominguez of Cohen Milstein Sellers & Toll PLLC and Max Schwartz and Tom Laughlin of Scott + Scott Attorneys At Law LLP.
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