mCloud Technologies Stock is Worthless, what Does that Mean for Investors
Published On: February 16, 2024

mCloud Technologies is now worth $0.000 per share which means Investors in both their common stock and Debentures have likely lost a bundle. Brokerage firms and investment advisors who recommended this company to their clients are targeted for investor complaints for fraud and suitability violations.

mCloud Technologies’ Stock is Worthless, what Does that Mean for Investors?

mCloud Technologies, a Canadian company that was supposed to be a cutting-edge AI company, turned into a bust for investors.  Currently, the common shares of mCloud Technologies (MCLDF) are worth $0.00 per share after a free-fall that began just before the onset of the COVID-19 pandemic.  The common stock of MCLDF debuted on the U.S. OTC market in May 2018 at $12 per share. It peaked a few months later at just over $15 per share and then about a year later, in February 2020, nearly hit $15 again.  From there, it began a steady fall and was trading below a dollar per share by January 2023, finally flatlining at under a penny per share in September 2023.

mCloud accessed the United States securities markets by raising money through several private placements of stock, warrants, and debentures issued by the company. A warrant is a form of option contract which gives the owner the right, but not the obligation, to buy some other form of security issued by the company.  A debenture is a type of debt security, similar to a bond, but are generally more speculative than bonds because they are usually issued by private companies and are not secured. According to forms filed with the United States Securities and Exchange Commission (SEC), mCloud registered several private offerings beginning on October 23, 2018 through September 1, 2021.

Some of these Form Ds identify U.S.-based securities brokerage firms as being the “associated” broker-dealer on the offerings.  When a brokerage firm is identified on a Form D filing, it means that the brokerage firm and the issuer of the securities, in this instance mCloud, have entered into a selling agreement whereby the brokerage firm has agreed to sell the securities in question. The Form Ds indicate that American Trust Investment Services, a broker-dealer headquartered in Whiting, Indiana and who has offices in the Chicagoland area, was the associated broker-dealer on some of these offerings.  Alliance Global Partners, of Westport, Connecticut is also identified as an associated broker dealer on other mCloud private offerings. These Form Ds reflect the substantial sales compensation received by these firms for offering these private placements to their clients. It is not unusual for brokerage firms like American Trust Investment Services and Alliance Global Partners to received in excess of 7% of the amount sold as sale compensation. According to the Amended Form D dated September 1, 2021, American Trust Investment Services sold $8,974,000 in debentures for mCloud to 163 investors, generating a $314,100 “finders’ fee.”

What did These Brokerage Firms and Financial Advisors Do Wrong?

Any investment in mCloud Technologies, whether it was in a private placement or its common stock, was a high-risk speculative bet on the success of a new foreign high-tech company. Any investor who was solicited by a financial advisor to invest in mCloud should have been clearly advised of that, as far as the risk spectrum of investments goes, mCloud was near the top of that list. Any representations by a financial advisor that the investments in mCloud were suitable for an investor who was not seeking to speculate with their money, could have a claim to pursue in FINRA Arbitration.

Regulation Best Interest, adopted formally as of June 30, 2020, requires all brokerage firms and their financial advisors to only recommend investments that it determines are in the best interest of its clients.  FINRA recently reiterated in Regulatory Notice 23-08 that the gold standard due diligence notice, Regulatory Notice 10-22 applies and that under the “best interest” standard, a broker-dealer should investigate, at a minimum, the following information when evaluating a private placement:

  • Regulatory and litigation history of the issuer and its management, including the criminal, disciplinary, regulatory, and litigation history associated with the issuer, its management, and any affiliate that may be materially involved in the issuer’s business, as well as the issuer’s compliance with the bad actor provisions under Rule 506(d)–(e).
  • New material developments, including events that are or should be reasonably known to the member during an offering, for example, when there are ongoing legal proceedings or regulatory inquiries involving the issuer.
  • Transactions or payments between an issuer and the issuer’s affiliates involving offering proceeds, including the terms of the transaction between the related parties and whether an arrangement presents a material conflict of interest for the issuer and, if so, the sufficiency of disclosure.
  • Representations of past performance of the issuer, its sponsor, or its manager to identify any such representations that may be misleading or exclusively selected based on positive results (or “cherry-picking”). This is particularly important when the representations pertain to specific prior issuances.

These “recommendations” are in addition to those items identified in Regulatory Notice 10-22.  To be clear, a brokerage firm’s obligation to perform a high-level and detailed investigation into an issuer of private placement securities is clear and unmistakable. The failure to perform this investigation, or the ignorance of red flags that arise during this investigation, can be grounds for a securities fraud and negligence claim against the brokerage firm.

With respect to mCloud common stock, depending on when an investor was solicited to invest, mCloud was likely a penny-stock.  Because of this categorization, any financial advisor selling mCloud common stock would be under heightened scrutiny for the recommendations due to the speculative nature of penny stock investing.  Many brokerage firms won’t even allow trades in penny stocks or other stocks trading “Over-The-Counter”.  As such, this invites brokers to mismark trade tickets as “unsolicited” – meaning the transaction was actually the client’s idea, when in fact they were recommended, “solicited” transactions.

What Options do mCloud Investors Have to Recover Their Investment Losses?

Investors that were solicited by their financial advisor to invest in mCloud securities, can bring a claim in FINRA Arbitration against the brokerage firm for suitability, due diligence violations and other related claims.  The FINRA Arbitration process is a private arbitration forum and allows investors to sue their brokerage firm privately and seek recovery of their investment losses.  The process tends to move quickly compared to litigation and discovery is limited to document exchange with no depositions allowed.

If you invested in any mCloud investments based on the solicitation of a financial advisor, please call Stoltmann Law Offices, P.C. at 312-332-4200 for a no-obligation free consultation with a securities attorney. Stoltmann Law Offices is a contingency fee firm offering representation to defrauded investors across the country, which means we do not get paid until you do.

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The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

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