Baldwin v. Net 1 UEPS Technologies, Inc.

Background

Jonathan Baldwin filed a proposed securities class action against Net 1 UEPS Technologies, Inc. (UEPS), Herman G. Kotze, and Alex M.R. Smith. He alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. According to the complaint, defendants made materially false or misleading statements or failed to disclose problems involving UEPS’s internal controls, its accounting for an investment in Cell C, and its fiscal-year 2018 income.

The proposed class consisted of people and entities that bought or otherwise acquired UEPS securities on the public market between September 12, 2018, and November 8, 2018, and suffered damages. Baldwin alleged that UEPS’s stock price fell from $7 per share on November 8, 2018, to $4.84 per share on November 9, 2018, after UEPS filed a report stating that investors should no longer rely on its previously issued financial statements. The opinion treated these facts as allegations for purposes of deciding the motion, not as established violations.

Baldwin moved under the Private Securities Litigation Reform Act of 1995 to become lead plaintiff and to have Levi & Korsinsky, LLP approved as class counsel. The motion was unopposed.

Lead Plaintiff Standard

The Act requires the court to appoint the person it determines is most capable of adequately representing the proposed class. The statute creates a presumption in favor of a person who filed the complaint or moved to become lead plaintiff, has the largest financial interest in the relief sought, and satisfies the relevant requirements of Federal Rule of Civil Procedure 23.

For this preliminary decision, the court focused on financial interest, typicality, and adequacy. Typicality asks whether the proposed lead plaintiff’s claims arise from the same conduct as the other class members’ claims. Adequacy asks whether the proposed lead plaintiff and counsel can fairly and effectively represent the class without conflicting interests.

Court’s Reasoning

The court found that Baldwin timely filed the complaint and his motion and that notice of the action was published on Accesswire, which the court described as a national business-oriented wire service. Baldwin was the only proposed class member who sought appointment as lead plaintiff. Although his alleged loss was modest, the court concluded that he had the largest financial interest among the applicants because he was the only applicant.

The court also found Baldwin’s claims typical because he bought UEPS shares during the proposed class period at prices he alleged were artificially inflated by defendants’ misleading statements and suffered an alleged loss. The court found that Baldwin had selected experienced counsel, had sufficient interest in the outcome, and had no apparent antagonistic interests with other proposed class members.

Counsel Approval and Disposition

Under the Act, the lead plaintiff selects counsel subject to court approval. The court said there is a strong presumption favoring a properly selected lead plaintiff’s choice and found that Levi & Korsinsky, LLP had extensive experience litigating securities and shareholder class actions.

The court granted Baldwin’s motion to be appointed lead plaintiff and for approval of Levi & Korsinsky, LLP as counsel. The Clerk was directed to terminate the motion. The opinion did not rule on the merits of Baldwin’s securities allegations.