Evolution Faces Legal Action over Disclosures and Regulatory Compliance

A class action lawsuit has been filed against Evolution by consumer and class action specialists Federman & Sherwood. The suit alleges Evolution deceived investors regarding its growth trajectory and compliance with US law, undermining its revenue and growth. The lawsuit covers the period between 14 February 2019 and 26 October 2023, seeking to recover damages on behalf of investors who purchased Evolution securities.

The Company Faced Rising Pressures

Evolution has faced regulatory challenges, including allegations of breaching US sanctions and operating in countries black-listed by the US. In November 2021, the company was accused of conducting business illegally in several markets, resulting in a substantial decline in its share price. A January 2022 analyst report suggested that a significant portion of Evolution’s revenue could be at risk due to potential regulatory clampdowns.

In April 2022, Australia’s gambling regulator requested ISPs to block unlicensed online gambling sites, five of which were Evolution customers, leading to a decline in the company’s share price. The Swedish Administrative Court upheld a record fine on an Evolution customer, ComeOne Group, resulting in an 11% drop in shares. Reports of industry entities lobbying against the UK’s planned gambling laws overhaul also impacted Evolution’s shares.

Evolution’s financial reports revealed several underlying challenges, showcasing stagnant North American performance and flatlined overall growth, leading to share price declines. October 2023 marked the latest negative development for Evolution as it experienced delays in opening new studios, raising concerns regarding the company’s long-term prospects.

The Plaintiff Alleges Evolution Obscured Information

The Federman & Sherwood complaint alleges violations of Section 10(b) of the Securities Exchange Act and Rules and breaches of Section 20(a) of the Securities Exchange Act. The lawsuit claims that between 24 January 2022 and 26 October 2023, various disclosures revealed the truth about Evolution’s compliance, revenue, and growth, leading to a significant share price drop.

“The Complaint alleges that Defendants… made materially false and/or misleading statements regarding Evolution’s compliance with governing laws…and growth strategies.”

Federman & Sherwood statement

The suit names Martin Carlesund, Evolution CEO, and Jacob Kaplan, chief financial officer defendants. If the company did obfuscate its growing regulatory and compliance issues, it could have significant long-term repercussions. Evolution has not yet responded to the allegations, likely preferring to save its efforts for the impending hearing.

Federman & Sherwood set a deadline of 26 March 2024 for investors wishing to participate in the legal action against Evolution. The class action lawsuit sheds light on Evolution’s challenges in maintaining regulatory compliance. The subsequent impact on its financial performance and shareholder value could draw increased scrutiny on the sector as a whole.