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The trustees for the Arkansas Teacher Retirement System on Monday approved a $47.5 million settlement of a class-action securities lawsuit against Olaplex Holdings Inc., in which the system is the lead plaintiff.
Mark White, the system’s director, said the system claimed losses of $3.3 million on its investments in Olaplex Holdings Inc. in the securities lawsuit, but he doesn’t yet know how much money the system will receive as part of the settlement.
In other action, the system’s trustees authorized White to work with legal counsel to negotiate an extension or extensions of the system’s two-year $40 million promissory note to Highland LP and associated entities that was initially authorized in September 2023, and authorized the system to make a private equity investment of up to $35 million in the Canadian-based Novacap Management Inc.’s Novacap International Technologies VII-B L.P fund.
The trustees also approved the appointment of Magnolia School District Superintendent John Ward to an administrator trustee position that became vacant with the resignation on June 30 of former Lake Hamilton School District Superintendent Shawn Higginbotham, who has retired.
Ward will serve through June 30, 2027. Six people applied for the vacant trustee position, said Board Chairman Danny Knight of Sherwood.
The Arkansas Teacher Retirement System is the state government’s largest retirement system, with investments valued at roughly $23.3 billion and more than 100,000 working and retired members.
White told the system’s trustees on Monday that a federal judge granted the system lead plaintiff status in a class-action securities lawsuit against Olaplex Holdings Inc. in January of 2023, in which the system claimed losses of $3.3 million.
In December 2022, the securities monitoring law firm Labaton Keller Sucharow recommended that the system seek lead plaintiff status in the class-action securities lawsuit against Olaplex Holdings Inc., and the system’s trustees authorized the system to seek lead plaintiff status in the case, he said.
The lawsuit alleged that Olaplex made false and misleading statements by failing to disclose macro-economic pressures and competition in the haircare market, Labaton Keller Sucharow said in a 2023 news release, and the company was unlikely to maintain its sales and revenue momentum and achieve the financial and operational growth projected in its offering documents.
White said the defendants filed a motion to dismiss the lawsuit and the judge granted the motion in part to some of the defendants in the case and left some of the defendants out of the case, but the “judge upheld what were really the core claims of that case against Olaplex.”
The court ordered mediation that was led by a very well-qualified mediator who is experienced in these type of securities class-action claims, he said.
“After going back and forth between the parties, the mediator made a recommendation to both parties that this case be settled for $47.5 million and that would be total amount paid out by the company to settle the claim,” White said. “The defendants have indicated they will accept that. I believe that is a reasonable amount. Our attorneys believe that’s a reasonable amount.”
But he added that “it is too early for us to know how much of that we will see.”
“We will get a small fraction of that because that’s split up among all the investors,” White said.
In addition, “We will ask the judge to allow us to be reimbursed for our time and expenses in being the lead plaintiff for this case,” he continued.
White said the attorneys at Labatan Keller Sucharow recommended that the system’s trustees approve settling the lawsuit at $47.5 million, and to authorize him to take all steps necessary to complete the settlement.
Afterward, White said in a written statement that “In the Olaplex lawsuit, one of the contested issues is who all should be part of the class, so there is not an exact answer to that question yet.
“As lead plaintiff, our position was that the class should include all shareholders who purchased or otherwise acquired Olaplex common stock in or traceable to the company’s Initial Public Offering (IPO) in September 2021,” he said. “There were approximately 85 million shares sold to the public in that IPO, and ATRS purchased about 73,000 of those shares.
“We don’t have any way of knowing yet how much ATRS would receive in a settlement. ATRS will be treated the same as other class members in the settlement and will receive the same pro-rata share of the recovery,” White said.
The trustees on Monday voted to authorize White to work with legal counsel to negotiate an extension or extensions of the system’s $40 million note to Highland LP and associated entities, after Arkansas Capital Corporation and White recommended the action.
Highland LP invests in biomass-related industries in the United States, Arkansas Capital Corporation said in a letter dated July 16 to White.
Arkansas Capital Corporation said Highland LP owns, directly or through subsidiaries, Highland LLC, Highland Pellets Holdco LLC, Highlet Pelletts Subholdco LLC, Highland Pellets LLC, Highland Port LLC, Highland Pellets South LLC., Highland FR LLC, Highland Grenada LLC and Highland Maine LLC.
Highland Pellets LLC and Highland FR LLC are the main operational assets of Highland LP, according to the Arkansas Capital Corporation. They comprise two wood pellet production plants in Pine Bluff, which produce pellets under offtake agreements for a major United Kingdom utility customer through 2026 and a major Danish utility customer through 2027.
Arkansas Capital Corporation said Highland received a $40 million loan from the system in September 2023 that matures in September of this year, and the note balance will be $61,064,266 as of September of this year.
“Highland believed that they had a pathway to pay off that note, but due to uncertainties in EU (European Union) markets for wood pellets they will not be able to do so at this time,” Arkansas Capital Corporation said in its letter to White.
“Management has presented a reasonable strategy that they believe will allow them to retire this note,” Arkansas Capital Corporation said. “We would recommend that the ATRS board authorize (White) to work with counsel as necessary to negotiation an extension, or extensions of that note while they pursue this strategy.”
White told the system’s trustees that he is looking at extending the system’s note with Highland through the end of this year, and “going beyond is going to depend in part on what that other (main creditor) does because we don’t want to get into a situation where we are extending and the other one is not.”
The trustees on Monday approved a private equity investment of up to $35 million in Novacap Management Inc.’s Novacap International Technologies VII-B L.P.
In December, the trustees approved a private equity investment of up to $35 million in Novacap Management Inc.’s Novacap International Technologies VII L.P., a fund that will make control buyout investments in middle market technology, media and telecommunications platform companies based primarily in Canada and the United States.
“Due to significant demand by investors, the general partner reached the regulatory limit for the number of limited partners allowed for the partnership,” the system’s staff said Monday in a memo to the system’s trustees.
“In order to accommodate all investors, the general partner is forming a second parallel vehicle called Novacap International Technologies VII-B, LP,” the system’s staff said. “ATRS will need to commit to this vehicle that will have the same terms and exposure to portfolio investments as the original fund.”
