According to a press release dated April 30, 2003, U.S. District Judge Stewart Dalzell has approved an $8 million settlement in a class action securities suit against ATI Technologies Inc., a Canadian manufacturer of computer graphics chips that was accused of misleading investors with falsely optimistic sales projections in early 2000 in order to inflate stock prices prior to a major acquisition. Dalzell also approved an award of attorney fees equal to 30 percent of the settlement fund, or $2.4 million, to the team of plaintiffs' lawyers.
The original complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between January 13, 2000 and May 24, 2000, thereby artificially inflating the price of ATI securities. The Complaint alleges that throughout the Class Period, defendants repeatedly issued press releases highlighting the Company's strong revenue growth and industry-high gross margins. These statements were materially false and misleading because they failed to disclose that (i) the Company was experiencing declining demand for its graphics chipset products and was decreasing its prices in order to stimulate demand; (ii) two of the Company's primary competitors, S3 Inc. and Neomagic, were flooding the market with cheaper and better products, which was rendering ATI's product offerings increasingly unattractive; (iii) the Company was failing to writedown a material portion of its inventory, which was impaired given the current conditions in the graphics chipset market. Accordingly, the Company's reported operating results were materially overstated; and (iv) that defendants' opinions, estimates and projections concerning the Company, its business and earnings were knowingly lacking in a reasonable basis at all times. Finally, on May 24, 2000, defendants issued a press release which shocked investors by announcing that ATI would be reporting lower than expected revenues. Defendants also disclosed that ATI's gross margins had declined to 21% and that the Company would be writing down $56 million worth of inventory. In response to this announcement, the price of ATI common stock declined precipitously - falling from $16.75 per share, on May 23, 2000, to $8.4375 per share on May 25, 2000.