The motion for preliminary approval was granted on February 27, 2009.
According to a Form 8-K filed by Sourcefire on February 26, 2009, "the Company and the other defendants tentatively settled all claims in the lawsuit by entering into a settlement agreement with the lead plaintiff. The settlement requires final approval from the court, and no assurances can be given that the settlement will ultimately be approved. Neither the Company nor any of the other defendants admitted any wrongdoing in connection with the proposed settlement and, if finally approved, the settlement will result in the dismissal of all claims against all defendants. The Company recorded a $100,000 expense in the fourth quarter related to the terms of the settlement agreement and does not expect to incur any additional expenses with regard to the settlement other than legal fees."
On February 11, 2009, plaintiffs filed a motion for preliminary approval of settlement, which the court granted on February 27, 2009.
The judge consolidated all the related cases and appointed an individual investor a lead plaintiff on September 4, 2007. A Consolidated Complaint was then filed on October 4. Motions for dismissal were filed on November 20. The motion was granted in part on April 23, 2008. Answers to the remaining claims were filed in May.
The Complaint alleges that on March 9, 2007, Sourcefire accomplished its IPO of 5,770,000 shares at $15.00 per share for estimated net proceeds of $71.8 million to Sourcefire pursuant to the Registration Statement that represented that Sourcefire’s revenues, gross profits and earnings were materially increasing, reporting positive financial results for the quarter and year ended December 31, 2006. The Complaint further alleges that on April 9, 2007, Sourcefire issued a press release announcing its preliminary results for the quarter ended March 31, 2007 that disclosed, in part, that "Historically, the first calendar quarter has been the slowest quarter of the year for us due to seasonal factors. This year, we saw an exaggeration of that trend due to a smaller than expected initial order from a substantial and strategic new account and an unusual number of transactions delayed or deferred very late in the quarter. This was particularly dramatic in the Federal sector where we saw a number of delays in the processing of awarded procurement transactions . . . ” The Complaint alleges that on this news, Sourcefire’s stock price declined from $17.35 per share on April 5, 2007 to close at $12.28 per share on April 9, 2007, the next trading day, on volume of approximately 1.6 million shares.
The Complaint further alleges that the Registration Statement was materially false and misleading in violation of Sections 11, 12 and 15 of the Securities Act of 1933 because it did not disclose that revenues from the Federal government component of Sourcefire’s business had materially slowed due to materially lower spending by the federal government.
A similar purported class action complaint has also been filed in the U.S. District Court for the Southern District of New York.