The original complaint charges ORBCOMM and two of its officers and directors with violations of the Securities Act. ORBCOMM is a satellite-based data communication company that operates a two-way wireless data messaging system optimized for narrowband data communication worldwide.
According to the complaint, on or about October 30, 2006, ORBCOMM filed with the Securities and Exchange Commission a Form S-1/A Registration Statement (the “Registration Statement”), for the IPO. On or about November 3, 2006, the Prospectus with respect to the IPO, which forms part of the Registration Statement, became effective and, including the exercise of the over-allotment, more than 9.2 million shares of ORBCOMM’s common stock were sold to the public, thereby raising more than $101 million. The complaint alleges that the Prospectus contained inaccurate statements of material fact because it failed to disclose that demand for the Company’s products was weakening as certain end-users were delaying purchases and international sales were being negatively impacted by delays in modifying regional applications.
Then, on August 14, 2007, ORBCOMM issued a press release announcing its financial results for the second quarter of 2007, the period ending June 30, 2007. In the press release and thereafter, the Company revealed that it was experiencing weakening demand for its products and services and was not adding subscribers at the rates it had anticipated. In response to this announcement, the price of ORBCOMM common stock declined from $11.18 per share to $7.86 per share on extremely heavy trading volume.
According to the Company’s FORM 10-Q for the quarterly period ended March 31, 2009, on September 20 and 25, 2007, two separate plaintiffs filed purported class action lawsuits in the United States District Court for the District of New Jersey against the Company and certain of its officers. On June 2, 2008, the Court consolidated the actions, appointed Erwin Weichel, David Peterson and William Hunt as lead plaintiffs and approved the lead plaintiff’s selection of co-lead and liaison counsel. On July 17, 2008, the lead plaintiffs filed their consolidated complaint against the Company and certain of its officers, and added as defendants the two co-lead underwriters of the Company’s initial public offering, UBS Securities LLC and Morgan Stanley & Co. Incorporated. The consolidated complaint alleges, among other things, that the Company’s registration statement related to its initial public offering in November 2006 contained material misstatements and omissions in violation of the Securities Act of 1933. The action cited, among other things, a drop in the trading price of the Company’s common stock that followed disclosure on August 14, 2007 of a change in the Company’s definition of billable subscriber communicators and reduced guidance for the remainder of 2007 released with the Company’s 2007 second quarter financial results. The action seeks to recover compensatory and rescissory damages, on behalf of a class of shareholders who purchased common stock in and/or traceable to the Company’s initial public offering on or about November 3, 2006 through August 14, 2007. On February 25, 2009, the Company and the other named defendants agreed in principle to settle the action, while continuing to deny any liability for these claims, for a payment of $2,450,000 to be paid entirely by the Company’s insurer providing directors and officers liability coverage for the claims asserted in the litigation. The agreement remains subject to final negotiated documentation executed by the parties and approval by the United States District Court for the District of New Jersey.
On July 21, 2009, Judge William H. Walls signed an Amended Order Preliminarily Approving Settlement. The Settlement Hearing is scheduled for October 15, 2009, to determine whether the proposed settlement should be approved by the Court.
On November 4, 2009, the Court entered the Orders signed by Judge William H. Walls approving the final settlement, approving the Plan of Distribution and awarding Plaintiffs’ Counsel's Attorneys' Fees and Expenses. The action is dismissed with prejudice and the civil case is terminated.