The law firm Pomerantz announced that it has filed a class-action lawsuit against the live dealer giant Evolution, for an alleged securities fraud.
A motion is due on 25 March. The suit accuses Evolution, among other things, of securities fraud and “other illegal business practices”. Pomerantz wants to know if Evolution committed any illegal acts during the 14 February 2019 – 25 October 2023 class period.
In the suit, several events that took place during class time and had an effect on Evolution’s shares prices are listed.
Analyst Generation Limited provided a report dated January 2022 to investors. Media coverage said that the report made two main allegations: that Evolution was “exposed” to revenue from illegal gambling and that future regulatory restrictions could put a part of its revenues at risk.
Following the release of the report, Evolution’s American Depository Shares dropped by 14.68% over the next three trading sessions.
Pomerantz noted also Evolution’s Q3 earnings and the subsequent earnings call held in October 2023 in which the company highlighted the delays in the opening of new Studios and the stagnation in revenue for certain sectors. Evolution’s ADS fell 7.61% in response to this news.
Evolution has yet to publish a response.
As part of a separate lawsuit, Evolution is accused by a plaintiff of misleading investors
Federman & Sherwood, a law firm in Pennsylvania filed a lawsuit against Evolution at the United States District Court Eastern District of Pennsylvania. In the suit, it is alleged that Evolution has deceived investors about its growth trajectory and regulatory compliance.
This suit spans the same period of time as Pomerantz, and alleges that Evolution has made false or misleading claims about its potential growth, customer compliance with the company, compliance by the company, and revenue impact.
The New Jersey Division of Gaming Enforcement announced in February that it has dropped a second case against Evolution. The NJDGE dropped the case after a thorough investigation of possible misconduct that dated back to November 20,21.
There were allegations that Evolution products had been made available to countries under US sanctions. The NJDGE dropped the case after deciding not to pursue any further action.
Evolution 2023’s net profit exceeds EUR1bn
The business achieved a net profit in 2023 of EUR1.07bn ($1.16bn/PS913.5m) despite some concerns about regulatory issues.
Live casino accounted for EUR1.52bn or 84.7%, a 23.5% increase on the previous year.
Martin Carlesund, the chief executive of Evolution Casinos, recently expressed concerns about Evolution’s inability to meet demand. Carlesund said Evolution will look to expand its games studios in order to meet this increase.
Carlesund stated that “we have increased our pace of studio expansions during the fourth quarter, and we expect this to continue until 2024.” We have opened a studio in Bulgaria, and we are in the process of building a second one in Colombia.
The revenue from RNG gaming (random numbers generators) grew 2.6% in 2023 to EUR275.3m, but dropped 3.7% to EUR69.8m for Q4. A Regulus Partner analyst responded by calling Evolution’s RNG performance “embarrassing”.
