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Eros Takes Legal Action Against Short Sellers

Eros International, the leading multinational distributor of Indian movies, has filed a lawsuit against companies and individuals which have shorted its stock and allegedly spread misinformation.

Eros says that the case was filed in New York County Supreme Court against Mangrove Partners, Manuel P. Asensio, GeoInvesting, LLC, and others.  It alleges a conspiracy to disseminate material false and defamatory information about Eros and misconduct that has harmed the company. “Eros seeks damages and injunctive relief for defamation, trade libel, civil conspiracy, and tortious interference,” it said in a statement.

Eros, which has its legal seat in the Isle of Man and is managed from London, shifted its share listing from London to the New York Stock Exchange. It hoped that it would find more analyst coverage and a deeper market.

GeoInvesting is only one short seller that has attacked Eros. The company has been the object of numerous and repeated short selling attacks – also known as short squeezes – in which investors holding short positions in the stock have released proprietary research that would cause the share price to drop. Another short seller to have published lengthy research documents online is Alpha Exposure. That is believed to be the alias of a Bollywood insider.

The researchers suggest that Eros: inflated the number of films it released in a year; overstated theatrical revenues by as much as 104% in 2015; understated the revenues earned in India by booking income in Mauritius and the UAE; falsified TV and digital revenues; and used unsafe means of amortization. Eros noted that last month another New York court dismissed a class action suit brought against it by short sellers.

The short selling and investor attacks have taken some toll. In March, it chose to forgo an opportunistic bond sale, after its shares plunged 12% following a GeoInvesting report.

In the past year Eros shares have ranged from $6.65 to $18.85. At its current $14.8 price, the company has a market capitalization of $910 million. It is the distributor of “Newton,” this year’s Indian selection for the foreign-language Oscar category.

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