NEW YORK, Sept. 26, 2020 (GLOBE NEWSWIRE) -- Pomerantz LLP announces that a class action lawsuit has been filed against Genius Brands International, Inc. (“Genius” or the “Company”) (NASDAQ: GNUS) and certain of its officers. The class action, filed in United States District Court for the Central District of California, and docketed under 20-cv-07764, is on behalf of a class consisting of all persons other than Defendants who purchased or otherwise acquired Genius securities from March 17, 2020, through July 5, 2020, inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, against the Company and certain of its top officials.
If you are a shareholder who purchased Genius securities during the class period, you have until October 19, 2020, to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at email@example.com or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
Genius stock was heavily marketed to retail investors through the use of several misleading tactics to entice investment. For example, Genius repeatedly compared itself to Netflix, calling itself the “Netflix for Kids, but free.” Netflix is, of course, one of the most successful growth stocks of the last decade, growing from under $10 per share in 2010 to over $450 per share today, and likening Genius to Netflix created an unwarranted “fear of missing out” feeling among investors. Genius also touted its purported association with celebrities like Arnold Schwarzenegger and Stan Lee to create hype.
Genius is a multimedia company that licenses entertainment content for children.
The Complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operational, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Nickelodeon’s purported broadcast expansion of Genius’s Rainbow Rangers cartoon; (ii) subscription fees for the Kartoon Channel!; and (iii) the Company’s growth potential and overall prospects as a company. While the share price of Genius stock was artificially inflated because of these misstatements, Genius registered for sale tens of millions of shares, allowing certain longtime investors to cash out at the expense of Plaintiff and the Class.
On June 5, 2020, Hindenburg Research published a report entitled “A Bagholder’s Guide to Why We Think Genius Brands Will Be a $1.50 Stock Within a Month” (the “Hindenburg Research Report”). This report questioned the valuation of Genius and highlighted inaccurate public statements made by Genius.
With respect to the Rainbow Rangers intellectual property, the Hindenburg Research Report showed that Rainbow Rangers was actually airing nine times per week, rather than the 26-airings figure noted in Genius’s press release. Moreover, the shows were not airing in favorable time slots and were, instead, being broadcast daily at 3:49 a.m. and then twice additionally on Sunday mornings at 6:00 a.m. and 6:30 a.m.
As the price of Genius shares was still artificially inflated, Genius once again filed securities registration documentation with the United States Securities and Exchange Commission (“SEC”). On June 11, 2020, just prior to the official launch of the Kartoon Channel!, Genius registered 60 million shares for sale by a group of “selling shareholders.” These selling shareholders were the same long-standing investors that purchased shares in the direct offerings described above, who could now “cash out” their investment in Genius at inflated prices. The share price listed in the prospectus was $4.51 per share.
Unfortunately for investors, Genius’s multimedia properties and the Kartoon Channel! in general were more hype than substance. When Genius announced the slate of content, investors began to realize that the Kartoon Channel! was not going to be the new Netflix for Kids, and was just another app in a crowded space. Indeed, on June 16, 2020, Genius stock declined by approximately 14% as the Company announced the programming lineup for the app.
Investors were also disappointed to learn that, although Genius repeatedly touted the Kartoon Channel! as being free, users wishing to download and interact with the Kartoon Channel! app through Amazon Prime would be forced to pay a $3.99 monthly fee. In fact, Genius often listed Amazon Prime first when discussing the potential reach of the Kartoon Channel!.
On June 19, 2020, while the price of Genius stock was artificially inflated, Defendant Andy Heyward (“Heyward”) sold 460,574 shares at an average price of $2.94 per share for a total sale of $1,354,088.
On July 2, 2020, Genius issued a press release touting that a “Key Business Development” would be announced on July 6, 2020. This vague announcement significantly boosted the stock price, as the price jumped from $2.31 per share on July 1, 2020, to $3.55 on July 2, 2020.
The July 6th announcement, however, was another exaggerated press release whereby Genius announced the creation of a joint venture with POW! Entertainment regarding the intellectual property that Stan Lee created after his time at Marvel Entertainment. Defendant Heyward stated that “[t]he potential value in this single asset, is greater than any IP anywhere in Hollywood.”
With these exaggerated statements, investors realized that the gig was up and that there was little substance behind the hype. Following the July 6, 2020 press release, the price of Genius stock dropped significantly from a close of $3.55 per share on the previous trading day to a closing price of $2.66 per share on July 6, 2020.
The Pomerantz Firm, with offices in New York, Chicago, Los Angeles, and Paris is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 80 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomerantzlaw.com.
Robert S. Willoughby