Evolution Faces Lawsuit for Alleged Unlawful Business Practices

Pomerantz LLP, a law firm specializing in securities litigation, has announced the filing of a class action lawsuit against Evolution AB. The legal action revolves around allegations that Evolution and certain officers and directors engaged in securities fraud or other unlawful business practices, leading to incidents that negatively impacted the company’s share price.

Ongoing Challenges Caused Shareholder Discontent

The lawsuit outlined several incidents during the specified class period of 14 February 2019 to 25 October 2023, which impacted Evolution’s share prices. Among these are the company’s Q3 results and the subsequent earnings call in October 2023. Evolution’s update to investors disclosed delays in opening new studios and reported stagnant revenues in some sectors. The company’s ADS price fell 7.61% in response to this news.

Another notable incident includes a report by Analyst Generation Limited in January 2022. Data made available to select investors contained two critical allegations. First, it suggested that a significant portion of Evolution’s revenue could be at risk due to potential regulatory clampdowns. Second, it claimed that Evolution had exposure to revenues from what the authors believed to be illegal gambling activities.

As the report’s contents became public, Evolution’s American Depository Shares (ADS) experienced a notable decline of 14.68%. Several Evolution customers faced regulatory action in Australia and Sweden, further damaging the company’s prospects. Accusations of lobbying in the UK and a stagnant US business did not help the company, causing its ADS price to keep tumbling.

The Lawsuits Could Have Long-Term Consequences

Pomerantz’s accusations closely mirror a similar case from January when consumer and class action specialists Federman & Sherwood filed another class action against the company. The suit alleged Evolution deceived investors regarding its growth trajectory and compliance with US law, undermining its revenue and growth. It is unclear whether Pomerantz will join Federman & Sherwood or whether the two lawsuits will remain separate.

The ongoing controversy has not derailed Evolution’s expansion ambitions. The company recently acquired Livespins in a EUR 5 million (approximately $5.4 million) deal. Evolution hopes to bolster its portfolio with cutting-edge technology and regain its momentum. However, achieving the desired results could take time, leaving the company vulnerable to investor pressures.

Evolution has not publicly commented on the allegations in the newest class action. Pomerantz has encouraged investors who incurred losses to participate in the lawsuit and submit their claims. The legal proceedings will determine whether Evolution violated securities laws or engaged in other unlawful practices during the class period and could serve as a pivotal point for the company.