According to a press release dated October 9, 2008, the Complaint charges AuthenTec and certain of the Company's executive officers with violations of federal securities laws. Among other things, plaintiff claims that defendants' material omissions and dissemination of materially false and misleading statements concerning the Company's business, operations and prospects, caused AuthenTec's stock price to become artificially inflated, inflicting damages on investors. AuthenTec is a mixed-signal semiconductor company that provides fingerprint authentication sensors and solutions to the high-volume personal computer, wireless device, and access control markets. The Company's sensors enable users to access and control multiple functions on an electronic device by touching or sliding a finger across the sensor.
The Complaint alleges that throughout the Class Period defendants knew or recklessly disregarded that their public statements concerning AuthenTec's business and operations were materially false and misleading. Specifically, the Complaint alleges that defendants' public statements were false and misleading or failed to disclose or indicate the following: (1) that the Company's sales growth was slowing; (2) that AuthenTec was flooding its customers with inventory; (3) as such, the Company's financial results were materially inflated; (4) that the Company lacked effective internal controls; and (5) as a result, statements made by the Company's management during the Class Period regarding the Company's financial results and strong revenue growth lacked a reasonable basis.
The Complaint further alleges that defendants issued favorable revenue guidance and touted the Company's financial performance, as well as AuthenTec's prospects for sales and revenue growth. For example, on July 28, 2008 the Company provided revenue guidance of $19 million to $20 million for the third quarter of 2008 and $72 million to $78 million for the full year of 2008. On that date, during a conference call with analysts, the Company told investors that "with regard (to) guidance, notwithstanding the macroeconomic weakness that is impacting a number of other technology companies, we expect our strong growth to continue, supported by new product introductions and a robust pipeline of design wins, which will drive increased revenue on a year-over-year basis."
Shortly thereafter, on September 7, 2008, AuthenTec shocked investors when the Company issued a press release in which it revised downward its previously issued financial guidance. In the press release, AuthenTec told investors that "the Company attributes the reduction in estimated revenue to an overstocked inventory position at a new customer and the impact of lower than expected sales of higher-end notebooks. ..." Moreover, during a conference call with analysts on the morning of September 8, 2008, the Company further revealed to investors that, "as it turns out, the effect of the downturn that has impacted many others in the semiconductor industry seems to have been masked to us by the fact that one of our newer customers overbought in the second quarter and even into the beginning of this quarter. This has led to an overstocking position on their part and thus reduced forecasts for the remainder of the year ... we are still working to fully understand the impact and the size of the inventory build, but at this point we are assuming that it will take at least a quarter for them to work through this inventory." On this news, AuthenTec's shares declined $3.84 per share, or 60.1 percent, to close on September 8, 2008 at $2.55 per share, on unusually heavy trading volume.
Plaintiffs filed their First Amended Class Action Complaint on January 9, 2009. The allegations of previous complaints are materially unchanged, but the class period was widened by approximately six months.
On December 24, 2008, the judge entered an order consolidated related cases and appointing and individual investor as lead plaintiff, while approving his selection of lead counsel.
On January 20, 2009, a Corrected Amended Complaint was against the defendants.
On September 24, 2009, an order on defendants' motion to dismiss the amended Complaint was granted. Accordingly, Plaintiff’s Amended Complaint was Dismissed With Prejudice.