Rite Aid Corporation (RAD) Misrepresented the Number of New Members Added by its Elixir Subsidiary
A shareholder filed a class action on behalf of all persons who acquired shares of Rite Aid Corporation (NYSE: RAD) securities between April 14, 2022 and September 28, 2022, for violations of the Securities Exchange Act of 1934.
According to the complaint, Rite Aid’s Pharmacy Services segment provides an integrated suite of pharmacy benefit management (“PBM”) offerings through, inter alia, the Company’s Elixir subsidiary, including technology solutions, mail delivery services, specialty pharmacy, network and rebate administration, claims adjudication, and pharmacy discount programs. During the class period, defendants touted the growth of Elixir’s PBM services business. In particular, in a letter to shareholders dated June 10, 2022, the Company noted that the “Elixir account and sales teams are gaining momentum, and we are executing more efficiently by consolidating functions. And the market is noticing—we have added 34,000 individuals covered by Elixir’s PBM services since January 1, 2022, with many more in the pipeline.” The Company continued to express positive results for Elixir’s PBM.
However, despite representations to the contrary, defendants failed to disclose that the number of new members (i.e., “lives”) that the Elixir PBM services business was adding during the selling season ending on January 1, 2023, was in material decline; and (ii) Rite Aid was likely to recognize a significant charge for the impairment of goodwill related to Elixir due to a decrease in “lives” covered by Elixir’s PBM services business. On September 29, 2022, Rite Aid announced a $252.2 million charge for the impairment of goodwill related to the Company’s Elixir subsidiary based on “an update to our estimate of lives for 2023 based on the latest selling season,” and that Rite Aid “expected[ed] lives to go down.” On this news, Rite Aid’s stock price fell $1.97 per share, or over 28%, to close at $5.06 per share on September 29, 2022.
What’s Next: Similarly situated shareholders may be eligible to participate in the class action against Rite Aid. If you acquired your shares between April 14, 2022 and September 28, 2022, and want to be appointed lead plaintiff for the class, you must file papers by December 13, 2022. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. You do not have to participate in the case to be eligible for a recovery.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.
