Updated: July 17, 2017
Status: Ongoing Case
Labaton Sucharow exposes a drama of nepotism and self-dealing in this securities class action against Eros, a leading Bollywood film production and distribution company
On October 10, 2016, Labaton Sucharow, as court-appointed lead counsel, filed an amended consolidated complaint on behalf of the lead plaintiffs against Eros International Plc (Eros), one of the leading production and distribution companies of Bollywood films. The company’s main subsidiary was founded in 1977 by Arjun Lulla. In June 2006, Arjun Lulla transferred control to his son Kishore Lulla.
This action exposes several Eros executives’ and Lulla family members’ hands in the corporate cookie jar. As described in the complaint, “Since its inception, the company has been run by and for the benefit of the Lulla family as a vehicle for the transfer of money to relatives and associates through extensive and systematic related-party transactions that generated personal wealth for them, but limited corporate profits.” Looking to expand the company as their personal piggy bank, the Lulla family decided to take the company public. In order to do so, Eros had to come out with a new cutting-edge product to convince investors of the company’s growth potential.
In August 2012, Eros launched Eros Now, a film-and-music streaming service. This new service would be crucial to attracting investors for the company’s IPO, which commenced in November 2013. Lead plaintiffs allege that Eros defrauded investors by knowingly overstating the usage and content of Eros Now. The growing user base and strong film portfolio touted by Eros drove the stock price to all-time highs. In reality, Eros was struggling to acquire paying users and lied about the number of movies in production, in its streaming library, and to which that Eros had distribution rights.
In sum, Eros stock lost more than 81 percent of its value between its class period high closing price on August 19, 2015 and its closing price on November 13, 2015.
The case is In re Eros International Securities Litigation, No. 15-cv-08956 (S.D.N.Y.). The lead plaintiffs are Fred Eisner and Strahinja Ivoševič. The defendants are Eros International Plc and certain of its officers and directors.