Pomerantz LLP announces that a class action lawsuit has been filed against MultiPlan Corporation f/k/a Churchill Capital Corp. III and certain of its officers, directors, and sponsors. The class action, filed in the United States District Court for the Southern District of New York, and docketed under 21-cv-01965, is on behalf of a class consisting of: (i) all purchasers of Churchill III securities between July 12, 2020 and November 10, 2020, inclusive (the “Class Period”); and (ii) all holders of Churchill III Class A common stock entitled to vote on Churchill III’s merger with and acquisition of Polaris Parent Corp. and its consolidated subsidiaries (collectively, “MultiPlan”) consummated in October 2020 (the “Merger”).
If you are a shareholder who purchased Churchill III securities during the Class Period and/or a holder of Churchill III Class A common stock entitled to vote on the Merger, you have until April 26, 2021 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 firstname.lastname@example.org 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.
Churchill III was formed in October 2019 as a blank check company. A blank check company is sometimes referred to as a special purpose acquisition vehicle, or “SPAC,” and does not initially have any operations or business of its own. Rather, it raises money from investors in an initial public offering and then uses the proceeds from the offering to acquire a business or operational assets, usually from a private company that does not publicly report financial or operating results. As a result, investors in blank check companies rely on the skill, transparency, and honesty of the blank check company’s sponsor to spend the offering proceeds to acquire a fundamentally sound target company that offers attractive risk-adjusted returns for investors.
On or about February 14, 2020, Churchill III completed its initial public offering, selling 110 million ownership units to investors for gross proceeds of $1.1 billion. Each unit was priced at $10 and consisted of one share of Class A common stock and one-fourth of one warrant to purchase Class A shares. Each whole warrant entitled the holder to purchase one share of Churchill III Class A common stock at $11.50 per share.
In July 2020, Churchill III announced that it had entered into a preliminary agreement, subject to shareholder approval, to merge with MultiPlan, a New York-based data analytics end-to-end cost management solutions provider to the U.S. healthcare industry. MultiPlan’s customers include large national insurance companies, provider-sponsored health plans, bill review companies, Taft-Hartley plans, and other entities that pay medical bills in the commercial healthcare, government, workers’ compensation, auto, medical, and dental markets.
On October 7, 2020, shareholders voted to approve the Merger at a special shareholders meeting.
The Complaint alleges that throughout the Class Period, Defendants made materially false and misleading because Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) MultiPlan was losing tens of millions of dollars in sales and revenues to Naviguard, a competitor created by one of MultiPlan’s largest customers, UnitedHealthcare, which threatened up to 35% of the Company’s sales and 80% of its levered cash flows by 2022; (ii) sales and revenue declines in the quarters leading up to the Merger were not due to “idiosyncratic” customer behaviors as represented, but rather due to a fundamental deterioration in demand for MultiPlan’s services and increased competition, as payors developed competing services and sought alternatives to eliminating excessive healthcare costs; (iii) MultiPlan was facing significant pricing pressures for its services and had been forced to materially reduce its take rate in the lead up to the Merger by insurers, who had expressed dissatisfaction with the price and quality of MultiPlan’s services and balanced billing practices, causing the Company to cut its take rate by up to half in some cases; (iv) as a result of all the foregoing, MultiPlan was set to continue to suffer from revenues and earnings declines, increased competition, and deteriorating pricing dynamics following the Merger; (v) as a result of all the foregoing, MultiPlan was forced to seek continued revenue growth and to improve its competitive positioning through pricey acquisitions, including through the purchase of HST for $140 million at a premium price from a former MultiPlan executive only one month after the Merger; (vi) as a result of all the foregoing, Churchill III investors had grossly overpaid for the acquisition of MultiPlan in the Merger, and MultiPlan’s business was worth far less than represented to investors; and (vii) as a result of all the foregoing, the Company’s public statements were materially false and misleading at all relevant times.
On November 11, 2020, just one month after the close of the Merger, short research investment firm Muddy Waters published a report on Churchill III titled “MultiPlan: Private Equity Necrophilia Meets The Great 2020 Money Grab” (the “Muddy Waters Report”). The Muddy Waters Report was based on extensive non-public sources such as interviews with former MultiPlan executives and other industry experts, as well as proprietary analysis. The Muddy Waters Report revealed that MultiPlan was in the process of losing its largest client, UnitedHealthcare, which was estimated to cost the Company up to 35% of its revenues and 80% of its levered free cash flow within two years.
According to the Muddy Waters Report, MultiPlan was in significant financial decline because of its fundamentally flawed business model, which profited from excessively high healthcare costs. UnitedHealth had purportedly launched a competitor, Naviguard, to reduce its business with MultiPlan and bring the over-priced and conflicted services offered by MultiPlan in-house. The Muddy Waters Report also accused MultiPlan of obscuring its deteriorating financial position in presentations to investors by, among other things, manipulating cash reserves to show inflated earnings figures in the years leading up to the Merger. The Muddy Waters Report also stated that MultiPlan had suffered from material, undisclosed pricing pressures that had caused it to slash the “take rate” it charged customers in half in some instances and falsely characterized revenue declines as “idiosyncratic” when in fact they were due to sustained, negative pricing trends afflicting MultiPlan’s business.
The Muddy Waters Report further stated that MultiPlan’s four previous private equity firm owners had “loot[ed] the business” for cash in the lead up to the Merger. According to the Muddy Waters Report, the sale to Churchill III was necessitated because MultiPlan’s private equity owners could not find anyone else willing to buy the failing business after these deep cuts, which had resulted in deteriorating service quality and increased customer complaints. The Muddy Waters Report quoted two former MultiPlan executives who spoke about the private equity stewardship of the Company right before the Merger, which had purportedly left Churchill III’s unwitting shareholders “hold[ing] the bag.”
The Muddy Waters Report stated that the decline in MultiPlan’s sales left the Company “no choice but to try to buy some form of revenue growth to mask eroding fundamentals.” Indeed, MultiPlan had just recently announced the acquisition of healthcare technology company HST for $140 million, which performed similar functions to those offered by Naviguard. The Muddy Waters Report described HST as “an attempt to buy an inferior, significantly smaller Naviguard stand-in, and at a premium price” from a former MultiPlan executive.
As a result of this news, the price of Churchill III securities plummeted. By November 12, 2020, the price of Churchill III Class A common stock fell to a low of just $6.12 per share, nearly 40% below the price at which shareholders could have redeemed their shares at the time of the shareholder vote on the Merger.
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
888-476-6529 ext. 7980