SFX Entertainment is facing a potential class action lawsuit from shareholders over Chairman and CEO Robert Sillerman's recent attempt to take the company private during a "go shop" period from May to Augus, which failed. The lawsuit alleges that Sillerman intentionally mislead investors as he attempted to purchase all the common stock he did not already own with promises he could not keep.
D. Geoffrey Armstrong, John Miller and Michael John Meyer are also named as defendants in the case.
According to a press release, the lawsuit, being chaired by Abby Spanier LLP and being filed in United States District Court for the Southern District of New York, "knew or recklessly disregarded and failed to disclose that he did not have any financing in place at the time he made his proposal and knew or recklessly disregarded that he could not obtain the financing to consummate the transaction."
The lawsuit alleges Sillerman "initiated and maintained a sham process" to try and get third party offers for either the entire firm or parts of it to try and shield himself from failing investment and rising debt that has mounted with the company share price plummeting to under $1.
The final major accusation is that Sillerman made statements to try and "fraudulently" inflate the market shares of SFX stock that would have fallen even further if the public had known the truth.
The lawsuit is still in its infancy and is still seeking shareholders to join the suit. Any shareholder who bought stock between February 28, 2015 and August 17, 2015 are eligible to join the suit.
This is the latest headache for SFX Entertainment, which is already dealing with a different lawsuit from former partners of Sillerman who claim that they helped create the idea to form the company and "identified and facilitated" the acquisitions of seven companies now part of the SFX umbrella and were later cut out of the equation.
