Notice to Attorneys:
This website seeks relationships with law firms having expertise in Canadian securities and franchising law as well as U.S. securities law. The purpose is to provide guidance to us in drafting regulatory complaints on these subjects within the stated jurisdictions. If you have such expertise and would like to assist, please contact us. ~ Thank you!
Covid-19 & Other Updates:
Seasonality – Despite its contrary statements to investors, previously, MTY has warned that seasonality is financially material and Cold Stone is its “largest concept… extremely seasonal” and that “this pattern is expected to be more important in the future” (PDF pg. 24). Following the whistleblower allegations, the company has continued the warning—ascribing it generally to the “Frozen treat category” (PDF pg. 28).
- December 11, 2020 – “MTY Food Group Inc. (TSE:MTY) Shares Could Be 26% Above Their Intrinsic Value Estimate”
- November 30, 2020 – The Franchise Relationship That Powers Small Business Is Fraying. “Stressed by the hit to business from the coronavirus pandemic, store owners and corporate bosses at Subway, Econo Lodge and other companies are bickering publicly as never before.”
- November 9, 2020 – Dickie Orr, Director and Audit Committee member since May 2011 sells another 5,000 shares totaling CA$232,500 for a total of 10,000 shares for CA$452,600 in just two weeks. This comes just two weeks after the company reported a cash declined $49.9 million in Q2 to $43.8 million in Q3. Is this an indication that struggling or defaulting franchisees aren’t paying royalties?
- October 26, 2020 – Dickie Orr, Director and Audit Committee member since May 2011 sells 5,000 shares totaling CA$220,100.
- October 22, 2020 – Franchisee Associations Surge in 2020 “Franchisees are in crisis…”
Warning to MTY Investors
Updated December 15, 2020
- MTY, CEO Eric Lefebvre and or Gary O’Connor, Chairman of the Audit Committee, repeatedly told investors the whistleblower allegations were reported by an “active employee” (pg. 1, pg. 2 and pg. 2). They knew these statements were false and or intended to mislead investors. The timeline leading up to the whistleblower announcement indicates this website is the whistleblower.
- They also repeatedly told investors the allegations were “baseless”, “evaluated” and “dealt with in the past” (pg. 2 and pgs. 2 & 6). They knew these statements were false and or intended to mislead investors. The company’s changes to its federal disclosures and the lack of a retraction, again, suggest the whistleblower allegations were true.
- Lefebvre told investors Cold Stone would “always” grow (pg. 2). The federal disclosures (PDF pg. 95) and the previously mentioned documents prove that he knew these statements were false and or intended to mislead investors.
- MTY, Lefebvre and or O’Connor knew that hundreds of other statements reported to MTY made in the promotion of its franchise investments were false and or intended to mislead investors.
Following the whistleblower announcement, MTY trended negatively and lost $1.1B in shareholder value—plummeting from $59.73 to $16.58 on March 18th. The damage to investors who relied on MTY’s false statements and loss money during its decline may be complete—even if the stock fully recovers in the future. In our opinion, MTY has done all it can to hide behind COVID. However, we estimate that perhaps more than half of this lost value is due to MTY, Lefebvre or O’Connor’s false statements and the company’s mishandling of the whistleblower allegations.
It appears MTY, Lefebvre and O’Connor have failed to retract their statements and warn investors of potential material impacts related to the whistleblower allegations. We believe this is to avoid embarrassment, additional negative publicity and mostly to protect the company and or board from potential financial liability from shareholder litigation and regulatory action.
Investors who suffered losses following MTY’s February 14, 2020 whistleblower announcement should ask their attorney if MTY is liable due to the company’s repeated false statements to investors. We are happy to assist legal counsel in the evidence gathering process and in separating damages due to the whistleblower allegations compared to COVID.
We’ll post an open letter to investors shortly summarizing all topics. We’ll provide greater details regarding MTY’s claim that Cold Stone—it’s perennial sales leader—purportedly grew internationally to 341 locations as stated in the federal disclosures. We’ve received evidence that the concept suffered a double-digit decline and had far fewer than 341 locations. In addition, we’ll discuss how these claims may be intended to cover up Lefebvre’s false statements about Cold Stone’s closure rate possibly to protect the company from $100’s of millions in investor claims for losses after the whistleblower announcement. In our opinion, this is evidence that MTY knowingly and intentionally mislead investors for the financial benefit of the company and its board of directors.
Finally, we intend to publish a summary of our findings and the evidence to a business news journal following the public of the open letter.
For the benefit of investors who would like to pursue damages from MTY without bearing legal costs, we also intend to provide contact information for a law firm that investors may contact for such legal assistance.
Until then, attorneys representing investors should feel free to contact us.