Chesswood Group Limited

This securities class action seeks to protect investors that purchased Chesswood Group Ltd.’s (“Chesswood“) securities between August 8, 2023 and August 14, 2024 (the “Class Period“).

Chesswood is a Canadian corporation and a responsible issuer under the OSA that is publicly traded. Chesswood reports itself as a holding company whose subsidiaries engage in the business of specialty finance (including equipment finance in the U.S. and vehicle finance and legal sector finance in Canada), as well as the origination and management of private credit alternatives for North American investors. 

During the relevant period, Chesswod published material fact news that its business operations and financials were doing well, it was in compliance with its debt covenants, and that investors could rely upon its published financial statements and MD&As. Although Chesswood negligently omitted what conditions the material-facts of the debt covenants. 

On June 14, 2024, Chesswood reported an ambiguous statement that it was in breach of its minimum borrowing base debt covenants associated with a $300 million senior revolving credit facility and was forced to sell assets (e.g., but omitted to disclose that it was selling assets to a then director of the Company and would be forced to restatement its previously released financial statements).  The market impact of this public corrective statement caused the price of Chesswood’s shares to diminish from $7.49 down to $3.75, or a drop of approximately 50%.

On July 22, 2024, Chesswood released a statement that it would need to restate its 1Q financial statements and MD&A as they related to the syndicated revolving credit facility, the breach of the debt covenants, suspension of borrowing capacity and originations by its subsidiaries Pawnee and Rifco; and implicitly reported that it still could not file its continuous disclosure core documents for the period of 1Q and 2Q 2024. The market impact of this negative material fact news was harsh and immediate on Chesswood’s securities; sending Chesswood’s share price from $2.81 to $2.66, which continued to fall through the next day down to $2.35.

By August 15, 2024, however, Chesswood’s securities closed at $0.90, without the ability to release financial statements, and having been forced to sell substantial assets to HB Leaseco Holdings Ltd. (a company affiliated with one of Chesswood’s directors). 

Chesswood has acknowledged that it may need to restate its financial statements released during 2023.

The Plaintiff and putative Classes suffered a foreseeable economic loss from the market impact of the Public Corrective Disclosures contradicting the material fact statements and the destruction to the corporation as described within the impugned documents

The Causes of Action.

Common law misrepresentations

Part XXIII.1, s. 138.3 of the Ontario Securities Act, if s. 138.8 is granted

Sections 100, 140(2), 145, 146, and 248 of the Ontario Business Corporations Act