Lawsuit Alleges Mobile Ad Company Velti Misled Investors About Payments From Europe
with a class-action lawsuit saying the company misled shareholders by claiming for more than two years it could recover money owed by customers in Greece and Cyprus.
Velti announced in an earnings report Aug. 20 that it was taking a write-down of $111 million to reflect its inability to recover these payments. The disclosure sent the company's stock price tumbling from $1 to $0.34 per share over the course of one day. Q2 revenue was $31.2 million, a decrease of 47 percent.
The suit, filed last week in the Northern District of California, is the latest black eye for one of the biggest companies in the mobile ad world. In May, Velti laid off about 200 of its 1,125 employees. Earlier this month, app developers were saying Velti owed them money in exchange for allowing the company to sell their inventory on its Mobclix exchange.The investor suit targets Velti and three current and former executives: CEO Alex Moukas, CFO Jeffrey G. Ross, and former CFO Wilson W. Cheung.
The woman who filed the complaint, Anika R. Rieckborn, alleges that prior to the write-down, the company had willfully failed to disclose the issues it was having collecting money it was owed, dating back to the prospectus the company issued prior to its January 2011 initial public offering. Rieckborn claims that even when probed by an analyst during a May 2012 conference call, Cheung failed to alert investors that the money was uncollectable.
The suit was filed on behalf of all people who held Velti stock between Jan. 27, 2011 and Aug. 20, 2013, a proposed class Rieckborn says numbers in either the hundreds or the thousands.
Velti did not immediately respond to Business Insider's request for comment.