On January 23, 2007 related cases were ordered consolidated and the appointment of lead plaintiff and lead counsel was approved. A consolidated complaint was filed on March 9, 2007, which defendants moved to dismiss one month later. The judge granted the motion to dismiss, providing the plaintiffs leave to amend the deficiencies in the complaint within 30 days on August 17, 2007. The plaintiffs failed to file a new complaint so the case was dismissed with prejudice on October 12, 2007.
According to a press release dated October 5, 2006, contrary to the representations made by the Company during the Class Period, Loudeye was operating well below guidance, Loudeye was not successfully integrating its acquisitions, and the Company's recent restructuring was failing. Also, as investors ultimately learned, at all relevant times, Loudeye suffered from severe financial and operational control deficiencies. The shocking revelation of the truth about the Company had a material and adverse impact on the price of Loudeye stock and following each of these disclosures shares of the Company declined precipitously -- falling from a Class Period high of almost $30 per share in late 2004, to less than $2.00 per share by the time that defendants announced that the remaining assets of the Company would be sold to Nokia.
The complaint charges Loudeye and certain of its officers and directors with issuing a series of materially false and misleading statements in violation of Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. Particularly, the complaint alleges that Loudeye: (1) deceived the investing public regarding Loudeye's business, operations, management and the intrinsic value of Loudeye common stock; (2) raised almost $60 million through the sale of stock and warrants to private equity investors while materially misrepresenting its business prospects; (3) used almost $25 million of its artificially inflated shares to purchase the once valuable asserts of companies such as Overpeer Inc. and OD2 during the Class Period; and (4) caused plaintiffs and other Class members to purchase Loudeye common stock at artificially inflated prices. Moreover, investors also charge that Loudeye insiders have negotiated the merger with Nokia mainly for the purpose of insulating themselves from liability for their prior illicit and improper conduct.