Jul 09, 2019
New York, New York, July 9, 2019 - On June 30, 2019 two shareholders of XpresSpa Group, Inc. (XSPA) filed a derivative action against certain members of the Board of Directors and related parties. In the action, plaintiffs alleged that the defendants had used deceptive accounting and other means to drive down the price of the stock by over 95%. According to the complaint, the value of the core assets of the business are at least $19 million and as much as $39 million and has remained substantially the same since 2016. A Form S-4 filed by XpresSpa on October 25, 2016 claimed an enterprise value of the underlying business of XpresSpa of $40 million. As of January 4, 2017, the market capitalization of the company was approximately $40 million but has since fallen to about $3.2 million, at approximately $2.00 per share.
Plaintiffs allege that the defendants in control of the company have a financial interest in a senior secured credit facility and intentionally drove down the stock price in order to convert that debt into common stock at artificially depressed prices. Bruce Bernstein, Chairman of the Board of Directors, is an investor in the senior secured credit facility. On July 8, 2019, XpresSpa’s board issued a press release and related Form 8-K disclosing amendments to the senior secured credit facility and various other securities. Among other things, the Board of Directors, led by Bernstein, entered into an agreement to amend the terms of the same senior secured credit facility to increase the principal of that debt and to provide for conversion of the debt into common stock at $2.00 per share.
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