AAC operates centers throughout the US that provide inpatient treatment for drug and alcohol addiction.
On October 1, 2014, AAC went public and sold five million shares to investors at $15 per share. In its S-1 registration statement, AAC stated that it was “not aware of any legal proceedings the ultimate outcome of which…would have a material adverse effect on our business, financial condition or results of operations. AAC also noted that it is dependent on its senior management and that if any of them left the company, it could have an adverse effect on the company and its operations. Also, AAC disclosed that if treatment centers in California, Nevada, or Texas were closed, it would also have an adverse effect on the company.
The class action alleges that, at the time, AAC knew that the California Department of Justice was investigating the death of a patient at Forterus, an AAC facility in California. A grand jury was investigating the company president, another current employee, and three former employees, and the California subsidiary for wrongful death.
On July 29, 2015, AAC reported that the grand jury had handed down an indictment in the case, and that AAC’s president (one of those indicted) had stepped down. However, AAC did not reveal that the charges were second-degree murder and dependent adult abuse. The price of AAC’s shares declined by 4%.
On August 3, 2015, AAC filed a Form 10-Q in which it revealed that the indictments were second-degree murder and dependent adult abuse. Stock market analysts also began to issue reports such as, “How Murder Charges Could Hurt AAC Holdings” at www.TheStreet.com. AAC’s stock price fell again, by 14%.
On the following day, Bleecker Street Research published a report entitled “Even More Undisclosed Deaths and the Start of Real Problems” citing seven other deaths at AAC facilities. Bleecker claims that AAC knew about the possibility of criminal charges since an assistant California attorney general filed an affidavit in a civil action in 2013 saying that “criminal charges will be filed.” In reaction to this report, AAC’s share prices declined 39%.
All told, since AAC disclosed that charges were being brought against Menz and its California subsidiaries, AAC’s common stock price fell by $19.18 per share, or 49%, wiping out $153 million in the company’s market capitalization.
What investors are part of this class action? The class period is currently defined as all persons who purchased AAC common stock between October 2, 2014 and August 3, 2015, inclusive (the “Class Period”). AAC common stock trades on the NYSE under the symbol “AAC”.
Procedural Status. The lawsuit was filed on August 24, 2015 and is captioned Kasper v. AAC Holdings, Inc., et al. It was filed in the Tennessee Middle District Court. Its civil docket number is 3:15cv00923. The lead plaintiff deadline is October 23, 2015.
Article Type: Lawsuit