Digital Printer Maker Hit With Stock-Drop Suit In NJ
A digital printing company was hit with a would-be shareholder class action in New Jersey federal court Thursday over claims that the company deceived investors by failing to inform them of faulty accounting practices.
Anthony Pipitone, a shareholder in Electronics For Imaging Inc., alleges the maker of graphics printers and its chief executive and financial officers, Guy Gecht and Marc Olin respectively, deceived investors by not disclosing problems with EFI’s tally of certain large-printer sales, leading to a 45 percent drop in the company’s share price after news of the internal investigation became public.
The company and its executives misled investors about how
- the Company was improperly recognizing revenue;
- the Company’s disclosure controls and procedures were not effective;
- the Company’s internal control over financial reporting were not effective; and
- as a result, the Company’s public statements were materially false and misleading at all relevant time
the complaint states.
The complaint cites allegedly misleading statements in a Form 10-K filed in February and Form 10-Q filed in May that said the company’s internal financial reporting controls were adequate.
But those statements were contradicted by EFI’s Aug. 3 release delaying an earnings call for the second quarter in which the company said it would need to assess its financial reporting concerning certain sales categories, the shareholders allege.
“The assessment is related to certain transactions where a customer signed a sales contract for one or more large format printers and was invoiced, and the printer(s) were stored at a third party in-transit warehouse prior to delivery to the end user,” the release said, according to the complaint.
This revelation caused the share price to drop to $21.61 from the previous day’s close of $26.05, and the executives knowingly made the false statements attesting to accounting controls, which inflated the share price, according to the suit.
The suit seeks to cover a class of those who held EFI shares from Feb. 22 through Aug. 3 and makes two claims under the Securities Exchange Act and a related U.S. Securities and Exchange Commission regulation.
Counsel for the investors and representatives for EFI were not immediately available for comment Thursday.
Pipitone and the shareholders are represented by Laurence M. Rosen of The Rosen Law Firm PA.