The Complaint brings forth claims for violations of the Securities Exchange Act of 1934 against Covetrus, Inc. (“Covetrus” or the “Company”), and certain senior executives of Covetrus. The Complaint alleges that Defendants made false and misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired Covetrus common stock from the start of regular-way trading on February 8, 2019 through August 12, 2019.
Covetrus sells and distributes products and software for veterinarians. The Company was formed through the spin-off and merger of the Henry Schein Animal Health business (“HSAH”), a sixty-five-year-old veterinary supply chain, distribution, and software business, and Vets First Choice (“VFC”), a privately-held start-up that developed an online pharmacy solution for veterinary clinics. Among other things, the Complaint alleges that during the Class Period, Defendants made a series of misrepresentations regarding purported successful integration of HSAH and VFC and HSAH’s supply chain business and technology platform.
Unknown to investors, Defendants’ statements were false and misleading. At the time of Defendants’ statements, Covetrus was unintegrated and wholly fragmented, leading to disappointing sales figures. Furthermore, the HSAH supply chain infrastructure and software platforms were antiquated, fragmented, and in need of substantial investments.
The truth was revealed to investors on August 13, 2019, when Covetrus was forced to report lacking integration, awful performance in the Company’s supply chain business, extensive new “infrastructure investments,” and poor financial results for the second quarter. The Company admitted that the lack of integration lied at the heart of these poor financial results, that the integration was still not complete, and that they had only “started to roll out” these capabilities. This news caused the Company’s stock price to plummet nearly 47% over just two trading sessions, eliminating over $1.2 billion in market capitalization. In the wake of these disclosures, Covetrus further acknowledged it needed to be “transparent” with investors and “rebuild trust” with them by holding management “accountabl[e].” Covetrus subsequently terminated several key executives, including its CEO and CFO. Moreover, and as alleged in the operative class action complaint that Lead Plaintiffs filed on May 21, 2020, the Company’s new CEO has extensively corroborated Lead Plaintiffs’ allegations of securities fraud through self-described “honest” and “frank” admissions of lacking integration.
On December 23, 2019, the Court appointed the City of Hollywood Police Officers’ Retirement System and the Pembroke Pines Pension Fund for Firefighters and Police Officers as Lead Plaintiffs and approved Saxena White as Lead Counsel. On May 21, 2020, Lead Plaintiffs filed their Amended Consolidated Complaint. Defendants’ Motion to Dismiss briefing concluded on October 21, 2020.
On August 3, 2021, the Court denied Defendants’ Motion to Dismiss in part, finding that Covetrus “repeatedly assured investors that  critical integration processes had been successfully completed, while [the Company’s new CEO], months later, acknowledged that no integration had taken place.” Specifically, the Court stated that Covetrus “made a series of representations . . . suggest[ing] that the company had successfully completed integration of the sales force.” Moreover, “these statements represent[ed] concrete, factual representations” of successful integration, while the Complaint’s allegations “demonstrate[d] that, even a year after the merger, this was still not the case.” Additionally, the Court sustained misrepresentations concerning the Company’s purported IT integration. In finding a “strong inference of fraud,” the Court stated that “the repeated representations [of successful integration] made, compared to the factual material concerning the actual state of the integration, leads to an inference that, at a minimum, [the former CEO] acted recklessly in making such statements,” also stating that the former CEO’s “significant financial stake” in the transaction, “far beyond that of an ordinary corporate official,” supports Plaintiffs’ allegations.
During three years of hard-fought litigation, Saxena White obtained and reviewed nearly 400,000 pages of documents produced by Defendants, prepared to take or defend at least 14 fact and expert depositions, commenced work on Plaintiffs’ upcoming motion for class certification, and participated in a one-day mediation that successfully resulted in a $35 million recovery for the benefit of the Class. The proposed settlement will rank among the Eastern District of New York’s top ten securities fraud class action recoveries and as the second largest securities class action settlement achieved in this District since 2010. On July 15, 2022, the court preliminarily approved the settlement. The Order further provided that any objections to the Settlement must be received no later than October 4, 2022, and that all claims must be postmarked no later than December 3, 2022.
On September 20, 2022, Lead Plaintiffs filed a Motion for Final Approval of Class Action Settlement, and Plan of Allocation, and for Attorney Fees and Reimbursement for Litigation Expenses. A final hearing is scheduled for October 25, 2022.
Claims Forms can be electronically submitted or downloaded at the Covetrus settlement website at: http://www.covetrussecuritieslitigation.com/