Ben Shaw rings the opening bell of the Nasdaq stock exchange in February as shares of the veterinary services firm Covetrus go public. Libby Greene photo

Covetrus, an animal health technology and service company based in downtown Portland, has been sued in federal court for allegedly misleading investors to artificially inflate its stock value prior to taking the company public eight months ago.

The class-action lawsuit was filed Monday by the City of Hollywood Police Officers’ Retirement System in Florida, which invested in Covetrus and lost money because of the company’s poor financial performance. Saxena White P.A., a Boca-Raton, Florida, law firm that specializes in securities fraud class-action lawsuits, is representing the retirement system and seeking other Covetrus investors as clients. The law firm did not return multiple interview requests Tuesday.

Covetrus was formed early this year in a merger between Portland-based Vets First Choice and Henry Schein Animal Health, a Melville, New York, veterinary supply and software company. Henry Schein Inc., Covetrus Inc., President and CEO Benjamin Shaw and Executive Vice President and CFO Christine Komola are named as defendants.

The suit alleges Covetrus made a series of misleading statements and omissions about the newly merged company’s infrastructure and capabilities before its debut on the Nasdaq stock exchange in February. Among the allegations are that Covetrus downplayed the loss of a major North American client and the impact of online competition and did not disclose the full cost of the merger.

As a result of the company’s misleading financial picture “Covetrus shares traded at artificially high prices” between when the company went public and a disappointing quarterly earnings report filed in August, the suit alleges.

Covetrus fell far short of financial expectations during its first full quarter in business and its stock price is a quarter of what it was when the company went public.


“Plaintiff and other members of the class purchased or otherwise acquired Covetrus common stock relying upon the integrity of the market price of the company’s stock and market information relating to Covetrus, and have been damaged thereby,” the lawsuit alleges.

A Covetrus spokeswoman did not respond Tuesday to multiple requests to comment on the allegations.

The company, which employs about 300 people in Maine, has 5,500 employees worldwide.

Work on a new Covetrus headquarters in Portland’s East End was underway in August. On Monday, a Florida law firm filed a complaint against the company, saying it misstated its finances to investors before going public. Derek Davis/Staff Photographer

Covetrus’ $1.01 billion revenues in its first full quarter in business were $50 million short of analyst expectations. The company reported a net loss of $10 million and lowered its annual earnings forecast to $200 million from an estimate of up to $250 million.

The company’s stock value plummeted 40 percent in a huge sell-off after its first quarter results were posted in mid-August. The stock was trading at $11.88 a share at market close Tuesday, down from a high of $46.19 when it launched, according to Yahoo Finance.

The collapse in the company’s value shows that its earlier statements were knowingly misleading and intended to falsely increase its stock price, the suit alleges.

“When the defendant’s misrepresentations and fraudulent conduct were disclosed, the price of Covetrus common stock fell precipitously as the prior inflation came out of the prices of the companies’ securities,” the complaint says.

In the wake of the its poor quarterly report, Shaw, Covetrus’ co-founder, stepped down as chairman of the board in September. Shaw, who also founded Idexx, an animal diagnostics firm in Westbrook, remains a board member. Shaw’s son, Benjamin Shaw, is Covetrus’ president and CEO.

Last year, the company, then known as Vets First Choice, got approval to build a 170,000-square-foot headquarters at 12 Mountfort St. in the city’s East End. The company hoped to have the building open by 2020 and hire 1,200 new workers there. Covetrus has not applied to change its plan for the building, according to the city’s planning department.

Related Headlines

Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.