Altice USA faces class action over securities fraud allegations
Altice USA, owned by Altice Europe and the French-Israeli billionaire Patrick Drahi – well known in Portugal since his purchase of Portugal Telecom in 2015 – has run into a ‘little local difficulty’ and is cited in a class action.
This legal move follows investigations to see whether Altice and certain of its officers and directors have engaged in securities fraud and other unlawful business practices.
In June, 2017, Altice conducted an initial public offering (IPO), selling 71.7 million shares at $30.00-a-share. This raised around $362 million.
Less than five months later, on November 3, 2017, during a conference call to discuss the financial results for Altice’s 2017 third quarter, an Altice director stated that the company had “seen a year-over-year deterioration in both France and Portugal in Q3 as a result of mismanaged rate events in both countries” and that “not everything is going right here at the moment.”
On November 15, 2017, during a conference run by Morgan Stanley, the Altice Chairman and Executive Director admitted that the Company had never applied, ‘the Altice Way,’ (a purported proprietary growth model developed by Altice in Europe) to its operations in France.
Since the IPO, the value of Altice stock has fallen more than 40%.
According to the complaint, Altice made false and misleading statements to the market.
Part of the lawyers’ complaint reads as follows:
1) “The Altice Way” proprietary growth model previously developed in Europe and described in the Offering Documents as a means to achieve superior margin performance, was falsely touting Altice’s capacity to face already existing highly competitive environments and ever-changing consumer behaviours
2) Altice was suffering from aggressively growing competition both in Europe and the United States, directly causing negative and decelerating revenue and EBITDA growth and impacting Altice’s market share;
3) more specifically, Altice was suffering from mismanaged rate events, regulatory compliance and poorly managed network and customer care both in its France and Portugal segments, thereby impacting its customer base and churn rate;
4) Altice could not simply replicate the “The Altice Way” in the U.S.; and
5) as a result, Altice’s Offering Documents were materially misleading at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages.
Based on these facts, lawyers acting for investors claim that the statements made by Altice were false and materially misleading throughout the IPO period and when the market learned the truth about Altice, investors suffered huge losses.
The action is being led by the Rosen Law Firm, lawyers specialising in investor rights law, which aims to recover the losses under federal securities laws.
Patrick Drahi has yet to comment on this news that was released in the US on the 24th of December but no doubt will issue a stiff rebuttal. The fact is that the Altice USA share price has dropped 40%, a situation that questions his ability and perhaps his probity.