Inovalon Holdings, Inc.
Robbins Arroyo LLP: Inovalon Holdings, Inc. (INOV) Misled Shareholders According to a Recently Filed Class Action
Robbins Arroyo LLP announces that a class action complaint was filed against Inovalon Holdings, Inc. (NASDAQGS: INOV) in the U.S. District Court for the Southern District of New York. The complaint is brought on behalf of all purchasers of Inovalon Class A common stock pursuant to the company’s February 12, 2015 initial public stock offering (“IPO”), for alleged violations of the Securities Act of 1933 by Inovalon’s officers and directors. Inovalon, a technology company, provides cloud-based data analytics and data-driven intervention platforms to the healthcare industry in the United States.
Inovalon Accused of Misrepresenting Its Effective Tax Rate
According to the complaint, on January 12, 2015, New York City Mayor Bill de Blasio issued a press release announcing a major reform of New York City’s corporate tax structure to ensure that large businesses pay a fair share of taxes. On or about February 12, 2015, Inovalon completed the IPO, selling more than 25 million shares of common stock at $27 per share and raising more than $684 million in gross proceeds. Inovalon was required to disclose in its Registration Statement any known events or uncertainties at the time of the IPO that had caused or were reasonably likely to cause Inovalon’s disclosed financial information not to be indicative of future operating results. Inovalon was also required to discuss the most significant factors that made the offering risky or speculative.
The complaint alleges that the Registration Statement was negligently prepared because Inovalon officials failed to disclose the substantial revenues the company derived from sales in the City of New York and the State of New York. In particular, the State of New York’s corporate tax reforms had increased Inovalon’s purportedly “stable” 39% effective tax rate to 43% and thus negatively impacted its then-current and future financial results, including its earnings reported in accordance with Generally Accepted Accounting Principles. The complaint notes that the corporate tax reform was expressly designed to stop companies like Inovalon, who made more than $1 million in sales in New York City annually, from shifting income from New York to places with lower tax rates. On August 5, 2015, Inovalon finally disclosed the negative impact of the tax reform on Inovalon’s financial results, further admitting that it was reducing its fiscal 2015 earnings guidance due to the increase in the effective tax rate. On June 24, 2016, Inovalon stock closed at $17.42 per share, more than one-third lower than the IPO price.
Inovalon Shareholders Have Legal Options
Concerned shareholders who would like more information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.