On March 30, 2007, the Court entered the Order granting the Defendants’ motion to dismiss. On April 10, 2007, the Plaintiffs filed a motion for reconsideration of dismissal of the Consolidated Amended Class Action Complaint. On December 18, 2007, District Court Judge Joseph A. Greenaway, Jr. issued a separate Order and Opinion denying the motion for reconsideration.
According to the Company’s FORM 10-Q for the quarterly period ended September 30, 2006, several class actions were filed against Audible and two of the Company's executives in the United States District Court for the District of New Jersey. In December 2005, the United States District Court for the District Court of New Jersey consolidated the class action, appointed a group of lead plaintiffs and appointed lead plaintiff’s counsel. By prior agreement, the plaintiff’s consolidated amended complaint was filed on February 14, 2006. The plaintiffs seek unspecified monetary damages and their reasonable costs and expenses, including counsel fees and expert fees. The defendants have moved to dismiss the pleading.
The original Complaint alleges that defendants Audible and certain of its officers reported increased revenues and earnings, growth that would continue as the Company capitalized on increasing demand for its products and a growing customer base. Unbeknownst to investors, however, throughout the Class Period, defendants' representations about the Company's operations, made in Audible press releases and elsewhere, were materially false and misleading because they failed to disclose that: (a) the Company's heady growth could not continue without material investments in expensive strategic initiatives that would severely erode the Company's earnings in the foreseeable future; and (b) the Company was about to embark on expensive strategic initiatives that would constitute a material risk to the Company's growth and its stock price.
The Complaint further alleges on or around February 15, 2005, after the close of trading, Audible announced that in 2005 it would be undertaking several initiatives requiring substantial investments in infrastructure, new business units and marketing, among other areas, and that these initiatives would depress earnings and cash flow at least until 2006. As a result, the price of Audible common stock plummeted, falling from $26.70 per share on February 15, 2005 to $17.32 on February 16, 2005, a one-day decline of 35%, on unusually heavy trading volume of 20.9 million shares. Prior to this disclosure, defendants Katz sold 150,000 Audible shares for gross proceeds of $3,675,000, while defendant Kaplan sold 125,000 shares for gross proceeds of $3,062,500 in the Company's secondary offering on November 18, 2004.