BlackBerry hit with securities shareholder class action
A shareholder of BlackBerry Ltd sued the company and its executives on Friday, accusing them of inflating the stock price by painting a misleadingly rosy picture of the business prospects of its BlackBerry 10 smartphone line.business Updated: Oct 05, 2013 08:57 IST
A shareholder of BlackBerry Ltd sued the company and its executives on Friday, accusing them of inflating the stock price by painting a misleadingly rosy picture of the business prospects of its BlackBerry 10 smartphone line.
Waterloo, Ontario-based BlackBerry, formerly Research In Motion Ltd, misled investors last year by saying that the company was "progressing on its financial and operational commitments," and that previews of its BlackBerry 10 platform were well received by developers, according to shareholder Marvin Pearlstein in a lawsuit lodged in Manhattan federal court.
Pearlstein is seeking to represent a class of "thousands" of shareholders who bought stock between September 27, 2012, when the company touted its strong financial position, and September 20 of this year, when it revealed it would have to write down between $930 million and $960 million related to unsold BlackBerry 10 devices, according to the lawsuit.
"In reality, the BlackBerry 10 was not well-received by the market, and the company was forced to ... lay off approximately 4,500 employees, totaling approximately 40% of its total workforce," the complaint alleges.
In addition to BlackBerry, chief executive Thorsten Heins and chief financial officer Brian Bidulka are named as defendants. A spokeswoman for BlackBerry declined to comment.
BlackBerry put itself on the block in August after bleeding market share to other smartphone makers over the past few years, namely Apple Inc and Google Inc. It accepted a tentative offer of $4.7 billion from Fairfax Financial Holdings last month.
Several sources close to the matter told Reuters the company is in talks with Cisco Systems, Google and SAP about selling all or part of itself. BlackBerry has also asked for preliminary expressions of interest from Intel Corp and Asian companies LG and Samsung by early next week.
Cerberus Capital Management was reported to have expressed such interest on Wednesday.
According to the lawsuit, the write-down announced on September 20 sent stocks reeling, with share price dropping 24%, from $10.52 on September 19 to $8.01 on September 25. The 35-page complaint asserts two violations of the Securities and Exchange Act of 1934.
It is not the first time BlackBerry has been in trouble with investors. A judge threw out a 2011 lawsuit by a proposed class of stockholders who said the company misled them about the prospects of its then-new line of tablet and other products. The plaintiffs in that case have appealed the decision.