A class action lawsuit has been filed on behalf of security purchasers of PetMed Express Inc. between June 18, 2003 and July 26, 2004.
The complaint, filed in U.S. District Court for the Southern District of Florida, accuses the Pompano Beach, Fla.-based Internet pet pharmacy and three company officials of violating the Securities Exchange Act of 1934.
Plaintiffs allege that throughout the June to July period, the defendants misrepresented or failed to disclose serious flaws in PetMed's business model and its ability to guarantee the quality, safety, or efficacy of the drugs it sells.
As a result, PetMed's financial results were unsustainable, causing the stock to trade at artificially high prices.
At the same time, company insiders are alleged to have sold nearly $65 million of their privately held PetMed stock.
Earlier this year, the Florida Department of Health's Board of Pharmacy granted a request from PetMed for early termination of probation. The company had served two years of a three-year probation (see JAVMA, May 15, 2004).
PetMed had been charged with several counts of violating Florida law, including 33 counts of making deceptive, untrue, or fraudulent representations, or employing a trick or scheme in, or related to, the practice of a profession.
An agreement was reached, however, in which the pharmacy board concluded that no laws had been violated. Although admitting no guilt, PetMed agreed to three years of probation, among other stipulations.