The Ontario Securities Commission has accused the company formerly known as Facedrive Inc. of issuing misleading press releases about its COVID-19 contact-tracing bracelets.
The OSC said in a statement of allegations dated April 5 that the company, which has since rebranded as Steer Technologies Inc. STER-X, issued contradictory and misleading news releases about the capabilities and readiness of the technology, which is known as TraceSCAN. The company also failed to correct information about the anticipated release of certain features after it was clear the timeline was inaccurate, according to the OSC.
The securities commission levelled accusations against Steer chief executive Suman Pushparajah, chairman Junaid Razvi, and former CEO and chair Sayan Navaratnam, saying they failed to take adequate steps to ensure the news releases were accurate. (Mr. Navaratnam is the largest shareholder in the company.)
The company and the three executives reached a settlement with OSC staff on Wednesday. A hearing is scheduled on May 19 for the commission’s Capital Markets Tribunal to determine whether to approve the agreement.
Steer declined to comment. Mr. Navaratnam did not immediately respond to a request for comment.
Before rebranding as Steer, Facedrive began as a ride-hailing company but quickly expanded into food delivery, online retail and, as the pandemic ensued, contact tracing. Its valuation ballooned to more than $5-billion on the TSX Venture Exchange in 2021, briefly surpassing Maple Leaf Foods Inc. and CI Financial Corp., despite minimal revenue and recurring losses.
The company secured a $2.5-million grant from the Ontario government in February, 2021, to help develop TraceSCAN bracelets, which would alert wearers who were standing too close to one another according to public-health guidelines at the time, and collect data for contact tracing. The government said the device would be manufactured locally, but The Globe and Mail later reported that the company purchased completed hardware from China.
The OSC alleges that between April, 2020, and January, 2021, the company issued several news releases that “created confusion or a misleading impression” about TraceSCAN. Some announcements suggested TraceSCAN was a consumer-ready product, when in fact the company had only developed a prototype, according to the OSC.
Another release contained misleading information about the benefits of TraceSCAN, neglecting to mention that in order to be useful to the public, the device would have to interact with other contact tracing devices – which it could not do – or be supported by the government to encourage adoption. Yet another announcement boasted of features that had not been developed or tested.
Steer also entered into a consulting agreement with a company called Medtronics Online Solutions Ltd. in 2020. The CEO of Medtronics is the editor of a website called OilPrice.com, which ran a series of “overly promotional” articles about Steer, according to the OSC. One of the pieces on OilPrice.com compared Mr. Navaratnam to Elon Musk and portrayed him as a transportation visionary.
The OSC has alleged the arrangement with Medtronics is contrary to the public interest.
“Public companies that issue misleading news releases regarding the status of their products, particularly in emerging sectors such as COVID-19-related health technologies, deprive investors of the ability to make informed investment decisions,” the OSC said in its statement of allegations. “When officers and directors fail to ensure that news releases and other public disclosures are accurate and balanced, they undermine confidence in Ontario’s capital markets.”
The OSC did not detail the terms of the proposed settlement. The enforcement action is being heard by the Capital Markets Tribunal, which can issue fines and ban individuals from participating in the capital markets.
Steer’s stock price peaked at close to $60 in February, 2021. It has since crashed 99 per cent and trades for 30 cents.