RALEIGH…Embattled Red Hat, (Nasdaq:RHAT) which saw its stock price plummet more than 22 percent after announcing it would restate financial results back to 2002 due to an accounting change, now faces class action law suits.
“Red Hat Restating Results Back to 2002”
New York firm Goodkind Labaton Rudoff & Sucharow LLP and Atlanta’s Chitwood & Harley LLP both issued press releases yesterday alleging Red Hat reported false and misleading information that misled investors.
The law firms issue those releases seeking lead plaintiffs who bought Red Hat stock during a given period. “If you bought Red Hat securities between June 19, 2001 and July 13, 2004, inclusive, you may qualify to serve as Lead Plaintiff,” says the Goodkind Labaton statement. Papers have to be filed no later than Sept. 13, 2004, the law firm says.
The complaint alleges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. Specifically, the complaint alleges that defendants disseminated materially false and misleading statements to the market and concealed material adverse facts concerning the company’s financial performance. In particular, the company’s Form 10-K filed with the Securities & Exchange Commission (“SEC”) for the fiscal years 2002, 2003, 2004 and the first quarter of fiscal 2005, and the press releases announcing the financial and business performance were materially false and misleading by omitting to state that it had improperly recognized revenues in its subscription business.
Red Hat’s troubles saw wide coverage in the financial and Linux industry press. The Motley Fool, The Street.com, and Slashdot, among others, took varying approaches to the story. Although many analysts say Red Hat’s financial restatements are unlikely to make much bottom line difference to its numbers, they also point out that its stock is still trading at multiples 25 to 30 times projected earnings. They also point out that the restatement news followed the abrupt departure of the company CFO and quarterly earnings that did not meet expectations.
Class Action Complaint