In December 2006, the appellate court overturned the certification of classes in the six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings. Because class certification was a condition of the settlement, it was unlikely that the settlement would receive final Court approval. On June 25, 2007, the Court entered an order terminating the proposed settlement based upon a stipulation among the parties to the settlement. Plaintiffs have filed an amended complaint and filed a motion for class certification based on their amended allegations. It is uncertain whether there will be any revised or future settlement.
According to the Company’s FORM 10-Q For The Quarterly Period Ended September 30, 2004, the action against the Company is being coordinated with approximately three hundred other nearly identical actions filed against other companies. On June 25, 2003, a committee of the Company’s board of directors approved a Memorandum of Understanding (“MOU”), which has now been memorialized in a settlement agreement and related agreements that set forth the terms of a settlement between the Company, the plaintiff class and a vast majority of the other approximately 300 issuer defendants. Among other provisions, the settlement provides for a release of the Company and the individual defendants for the conduct alleged in the action to be wrongful. The Company would agree to undertake certain responsibilities, including agreeing to assign, not assert, or release certain potential claims the Company may have against its underwriters. No estimate can be made of the possible loss or possible range of losses associated with the resolution of this matter and it is anticipated that any potential financial obligation of the Company to plaintiffs pursuant to the terms of the settlement agreement and related agreements will be covered by existing insurance. Therefore, the Company does not expect that the settlement will involve any material payment by the Company and no liability associated with these lawsuits has been recorded at September 30, 2004. The settlement agreement has been submitted to the Court for approval. Approval by the Court cannot be assured. On October 13, 2004, the Court certified a class in six of the approximately 300 other nearly identical actions and noted that the decision is intended to provide strong guidance to all parties regarding class certification in the remaining cases. Plaintiffs have not yet moved to certify a class in the Company’s case.
The original complaint was filed alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On January 14, 1999, MarketWatch commenced an initial public offering of 2,750,000 of its shares of common stock at an offering price of $17.00 per share (the "MarketWatch IPO"). In connection therewith, MarketWatch filed a registration statement, which incorporated a prospectus (the "Prospectus"), with the SEC. The complaint further alleges that the Prospectus was materially false and misleading because it failed to disclose, among other things, that (i) Salomon, BancBoston, Bear Stearns, Credit Suisse, Merrill Lynch and Morgan Stanley had solicited and received excessive and undisclosed commissions from certain investors in exchange for which Salomon, BancBoston, Bear Stearns, Credit Suisse, Merrill Lynch and Morgan Stanley allocated to those investors material portions of the restricted number of MarketWatch shares issued in connection with the MarketWatch IPO; and (ii) Salomon, BancBoston, Bear Stearns, Credit Suisse, Merrill Lynch and Morgan Stanley had entered into agreements with customers whereby Salomon, BancBoston, Bear Stearns, Credit Suisse, Merrill Lynch and Morgan Stanley agreed to allocated MarketWatch shares to those customers in the MarketWatch IPO in exchange for which the customers agreed to purchase additional MarketWatch shares in the aftermarket at pre-determined prices. As alleged in the complaint, the SEC is investigating underwriting practices in connection with several other initial public offerings.