According to a press release dated November 1, 2007, the Complaint charges that Isilon, and certain of its officers and directors violated federal securities laws. Isilon completed its IPO of 8.9 million shares at $13.00 per share for net proceeds of approximately $105.7 million. According to the complaint, the Registration Statement failed to disclose the following: (i) the Company would not be able to reach profitability by the second half of 2007; (ii) Isilon's clustered storage solutions did not provide a competitively differentiated business model which would enable the Company to effectively compete against the dominant players in the traditional storage market; (iii) the Company's past results were not indicative of its future operations, its ability to continue to sustain quarter over quarter revenue growth, and its ability to manage its cost structure; and (iv) despite being able to grow and significantly diversify its overall customer base, the Company would remain highly dependent upon its largest customers, such as the Eastman Kodak Company.
On October 3, 2007, after the market closed, Isilon announced disappointing preliminary results for its third quarter 2007. On this news, Isilon's stock price collapsed from $7 per share on October 3, 2007 to close at $5.66 per share on October 4, 2007.
On February 04, 2008, the court ordered all actions will be consolidated into a single action under case number C07-1764MJP, entitled Dr. Magdy Fouad, individually and on behalf of all others similarly situated v. Isilon Systems, Inc., et al.. It was further ordered that Dr. Magdy Fouad was appointed individually as the lead plaintiff and Cohen Milstein were appointed lead counsel in the matter and Keller Rohrback were appointed liaison counsel.
On March 8, 2008, a Consolidated Complaint was filed against all defendants. The defendants responded by filing motions to dismiss on June 16, 2008. According to the Order dated December 29, 2008, fthe Court hereby denies Defendants’ request for dismissal of counts one, three and six, and grants in part the remaining requests for dismissal as follows: the Section 12(a)(2) claims in count two against Isilon, Fuhlendorf, and Goldman are dismissed; the claims in count four and count seven against Sequoia, Atlas, and Madrona are dismissed; and the Section 10(b) claims against Ruckelshaus and McIlwain are dismissed.
According to the Company's Form 10-K for the fiscal year ended December 31, 2009, on October 24, 2009, we filed a stipulation of settlement providing for the settlement and dismissal of the class action. On November 2, 2009, the Court granted preliminary approval of the settlement. The settlement provides for a payment to the plaintiff class of $15.0 million, of which Isilon contributed $2.0 million and the balance was contributed by our insurers in December 2009. The amounts were paid into an escrow fund pending final court approval. The class action settlement is subject to final approval by the Court at a hearing scheduled for March 5, 2010.
On March 5, 2010, the Court granted final approval of the class action settlement and dismissed the case with prejudice.