The law firm of Milberg Weiss Bershad & Schulman LLP has announced that it has filed a class action lawsuit on behalf of purchasers of shares in game publisher Majesco seeking monetary compensation, following the dramatic drop in the company's share value
and the resignation of CEO and Chairman Carl Yankowski last week after the company's 2005 outlook veered sharply from a net profit to a net loss.
The complaint against Majesco and current or former Majesco officers Carl Yankowski, Jan E. Chason and Jesse Sutton alleges that the company represented that the Company's revenue and income would continue to grow over its impressive 2004 and first half of 2005 results in its fiscal year 2005. But, claim the lawyers: "As defendants knew or recklessly disregarded, the Company's strong growth was unsustainable because retailers would either return a material quantity of unsold products or would meet 2005 demand by selling off excess inventory instead of ordering new products."
The lawsuit continues by suggesting: "In addition, unbeknownst to investors, but known to or recklessly disregarded by defendants, two of the Company's new video game titles flopped, and the Company could not meet its earnings expectations without the success of these new titles." This allegation refers to Advent Rising
, two of Majesco's higher-profile releases in 2005, and ones that have so far not managed to live up to expectations.
Milberg Weiss is alleging that Majesco was motivated to do this so that Majesco's secondary offering, a $75 million round of funding that closed at the end of January 2005, would be priced higher than it would have been had investors known the truth about the Company's business. However, Majesco has not yet commented on the suit, and the company's shares closed for the day at $3.46, down from a 52-week high of $23.66.