Stockholders v Embarcadero Technologies, Inc.
Embarcadero Technology Stockholders Sue after Stock Value Drops 23%
A class action has been filed in the Northern District Court of California against Embarcadero Technologies, Inc. (NASDAQ: EMBT) and certain of its officers and directors by stockholders who purchased the company's common stock between April 20, 2004 and October 27, 2004. The action claims that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.
Specifically, the complaint charges Embarcadero Technologies, Stephen Wong, and Raj Sabhlok with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. More specifically, the complaint alleges that the Company failed to disclose and misrepresented the following:
(1) that the Company had materially overstated its net income and earnings per share;
(2) that defendants prematurely recognized revenue in its UK subsidiary, Embarcadero Europe Ltd.;
(3) that the Company's financial statements were not prepared in accordance with Generally Accepted Accounting Principles ("GAAP");
(4) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and that as a result, the value of the Company's net income and financial results were materially overstated at all relevant times.
On October 27, 2004, Embarcadero Technologies announced that it was delaying the release of its financial results for the third quarter ended September 30, 2004. The Company also announced that its Audit Committee commenced an investigation of the revenue recognition practices of its UK subsidiary, Embarcadero Europe Ltd. (Embarcadero Europe), as a result of recent discoveries relating to Embarcadero Europe's resellers. This announcement caused Embarcadero Technologies to fall $2.29 per share, or 23.20 percent.
