Lawyers lining up to sue Lipman over second warning
20.10.2005 | 12:05
Omri Cohen
The second sequential revenue warning that Lipman Electronic Engineering (TASE, Nasdaq: LPMA ) released, this time for the third quarter of 2005, has triggered a flood of class action motions. Yesterday more law firms lined up to announce their moves: Tel Aviv-based Jacob Sabo, Federmann & Sherwood law firm of Oklahoma, Pomerantz Haudek Block Grossman & Gross of New York, Schatz & Nobel of Hartford, Connecticut, and Charles J. Piven of Baltimore all announced intentions to sue the Israeli firm for allegedly millions-representing the state of business at its English subsidiary Dione.
The case is being handled in the District Court for the Eastern District of New York, Piven's office said.
The class in question are investors who bought Lipman stock on Nasdaq or the Tel Aviv Stock Exchange between October 4, 2004 and September 27, 2005, inclusive, say the lawyers.
Solicitations for class actions have been swirling since last week, all based on the claim that Lipman did not disclose the true situation of its business, and thus artificially kept its share price high. The plaintiffs are demanding compensation for the losses they accuse the company of causing them.
The class has not been certified yet, and investors belonging to the class may motion the court by December 12, 2005 to serve as a lead plaintiff.
"Among other things, plaintiff claims that defendants' material omissions and dissemination of materially false and misleading statements caused Lipman's stock price to become artificially inflated, inflicting damages on investors...
"The Complaint alleges that defendants issued public statements which fraudulently created a false impression concerning the Company's business operations and prospects following the acquisition of Dione, a United Kingdom-based supplier of ``smart card'' payment systems," one law firm wrote.
Lipman had expected the Dione acquisition to be earnings accretive within a year, and during the period in question, the company "touted the Dione acquisition". But the bottom line was that Dione underperformed versus expectations.
During the class period, Lipman's fog enabled it to conduct a secondary offering, getting $29.75 per share in May 2005, the lawyers say.
On September 28, 2005, Lipman admitted that "weaker than expected performance of Dione" forced it to cut its earnings estimates for 2005, from the range of $1.39 to $1.42 per share, to $0.88 to $0.98 per share.
It also fired Dione CEO Shaun Gray on the spot and admitted to expecting a non-cash impairment charge relating to goodwill and other intangible assets for the year.
As the market reacted, Lipman stock sank 22% in a night.
Dubi
