The First Bancshares, Inc., Facing Securities Class Action

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A class action has been filed against The First Bancshares, Inc. and its board of directors claiming the parties violated the Securities Exchange Act of 1934 by lying to shareholders and providing preferential treatment to certain company insiders by offering them shares at discounted prices in order to influence acquisition decisions. Filed in Mississippi, the lawsuit stems from several transactions the defendants have engaged in, including the acquisitions of Iberville Bank and Gulf Coast Community Bank.

According to the complaint, class members allege the defendants misrepresented or left out material information about the acquisitions of Iberville Bank and Gulf Coast Community Bank, as well as private placement of preferred stock for which company insiders were given preferential treatment, in its filings to the Securities Exchange Commission. “The Proxy misrepresents and/or omits material information that is necessary for the company’s stockholders to make an informed decision whether to vote in favor of the approving issuance of common stock” as part of the acquisitions of the banks, the lawsuit says.

Summarily, shareholders allege they were put intentionally put in a difficult position by the company’s board: either approve a discounted purchase price for the common stock to be purchased by company insiders, or continue to lose money on an increased dividend rate.