Novatel Wireless Inc (NASDAQ: NVTL) Investor Securities Class Action Lawsuit 09/15/2008

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Company Name(s): 
Novatel Wireless
Case Name: 
Novatel Wireless Inc Shareholder Class Action Lawsuit 09/15/2008
Case Status: 
Settlement Approved
Affected Securities
NASDAQ: NVTL
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
09/15/2008
Class Period Begin: 
02/27/2007
Class Period End: 
09/15/2008
Court of Filing: 
U.S. District Court for the Southern District of California
Deadline To File for Lead: 
11/14/2008
Date Settled: 
06/23/2014
Settlement Amount: 
$16,000,000
Deadline to Participate in Settlement: 
06/30/2014
Summary: 

June 23, 2014 - The court held a final settlement hearing, approved the settlement, entered the orders approving the plan of allocation, the motion for attorneys’ fees and expenses, and dismissed the action with prejudice.

March 10, 2014 - The court preliminarily approved the settlement.

January 31, 2014 - Parties filed a stipulation of settlement.

July 28, 2009 - The court denied the defendants' motion to dismiss.

June 26, 2009 - The defendants filed a renewed motion to dismiss.

June 5, 2009 - The court granted the defendants' motion for reconsideration.

May 1, 2009 - The defendants filed a motion for reconsideration.

April 1, 2009 - The court denied the defendants' motion to dismiss.

February 9, 2009 - The defendants filed a motion to dismiss.

January 9, 2009 - The lead plaintiffs filed an amended consolidated complaint.

December 10, 2008 - The lead plaintiffs and lead counsel were appointed and all cases were consolidated.

November 17, 2008 - Lead plaintiff motions were filed.

September 15, 2008 - An investor in shares of Novatel Wireless Inc (NASDAQ: NVTL) filed a lawsuit in the U.S. District Court for the Southern District of California against Novatel Wireless Inc over alleged violations of Federal Securities Laws between February 5th, 2007 and August 19th, 2008.

According to the complaint, the plaintiff charges Novatel Wireless Inc and certain of its executive officers with omitting and disseminating materially false and misleading statements concerning Novatel Wireless Inc’s financial performance and prospects causing Novatel Wireless Inc’s (NASDAQ: NVTL) stock price to become artificially inflated, inflicting damages on investors.

The complaint alleges that throughout the specified time, defendants knew or recklessly disregarded that their public statements concerning Novatel Wireless Inc’s financial performance were materially false and misleading. Specifically, the complaint alleges that defendants’ public statements failed to disclose or indicate the following: (1) that Novatel Wireless Inc improperly recognized revenue in violation of its own revenue cut-off procedures; (2) that, as a result of this improper revenue recognition, Novatel Wireless Inc misstated its financial results between February 5th, 2007 and August 19th, 2008; (3) that Novatel Wireless Inc’s financial results were not prepared in accordance with Generally Accepted Accounting Principles (GAAP); (4) that Novatel Wireless Inc lacked adequate internal and financial controls; and (5), as a result of the foregoing, Novatel Wireless Inc’s financial statements were materially false and misleading at all relevant times.

During that time, defendants issued favorable revenue guidance and touted Novatel Wireless Inc’s financial performance and prospects. For example, on February 20, 2008, Novatel Wireless Inc provided revenue guidance of approximately $110 million for first quarter 2008, based in part on “expectations of strong demand for the Company’s products, particularly its USB products, as well as assumptions about industry wide supply constraints on certain components.” On May 20, 2008, however, Novatel Wireless Inc filed a Form 8-K with the SEC stating that the company “will notify the Nasdaq Stock Market that it did not timely file its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008,” and that “the Company and its Audit Committee have undertaken an expanded enhanced review of the Company’s revenue cut off procedures and internal controls related to certain customer contracts, which review is ongoing.” Then, on August 19, 2008, following the close of trading Novatel Wireless Inc shocked investors when it issued a press release which revealed that the Audit Committee of the Company’s board of directors had reviewed the accounting for six transactions and made a preliminary determination to move approximately $3.4 million of revenues from the first quarter of 2008 to the second quarter of 2008.

Moreover, Novatel Wireless Inc disclosed for the first time that this was not a minor accounting issue and that there was a possibility that the company may have to restate its audited financial statements for the 2007 fiscal year. As a result of this news, shares of Novatel Wireless Inc (NASDAQ: NVTL) declined $2.11 per share, more than 25%, to close on August 20, 2008 at $6.29 per share, on unusually heavy volume.

Novatel Wireless Inc provides wireless broadband access solutions for the mobile communications market worldwide.