Stockholders v Tripath Technology, Inc.
Tripath Technology Stockholders Sue after Stock Value Drops 50%
A class action has been filed in the Northern District Court of California against Tripath Technology, Inc. (NASDAQ: TRPH) and certain of its officers and directors by stockholders who purchased the company's common stock between January 29, 2004 and October 22, 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 Tripath, Adya Tripathi, and David Eichler, 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 improperly recognized revenue from sales of product that was eventually returned to the distributor;
(2) that as a result of this, the Company had to increase its sales return reserve for the third quarter and had to take a charge of approximately $4.0 - $4.5 million for excess inventory;
(3) that the Company's financial results were in violation of Generally Accepted Accounting Principles ("GAAP");
(4) that the Company lacked adequate internal controls, especially the ability to adequately estimate distributor sales returns in accordance with SFAS no. 48; and that as a result, the Company's financial results were materially inflated at all relevant times and the defendants lacked a reasonable basis for their statements regarding the Company.
On October 22, 2004, Tripath announced that net revenues for the third quarter of 2004 would be significantly below prior guidance of $4 - $4.5 million. Moreover, Tripath announced that it may have to restate its revenue for the quarter ended June 30, 2004. In addition, Tripath planed to take a charge of approximately $4.0 - $4.5 million for excess inventory. This announcement caused shares of Tripath stock to fall $.75 per share, or 49.34 percent.
On July 12, 2005 a $2.47 million dollar settlement was announced. The settlement class consists of all persons who purchased the securities of Tripath between January 29, 2004 and June 13, 2005, inclusive.
