Angie’s List, Inc. (NASDAQ:ANGI) operates a website that provides subscription-based reviews of local service providers, purportedly authored by other locals, and referrals to local service providers to consumers across the United States.
According to the press release, a class action has been commenced in the United States District Court for the Southern District of Indiana on behalf of purchasers of Angie’s List common stock during the period between February 14, 2013 and October 23, 2013 (the “Class Period”). The Complaint charges Angie’s List and certain of its officers and directors with violations of the Securities Exchange Act of 1934.
The Complaint alleges that during the Class Period, Angie’s List issued materially false and misleading statements regarding the strength of the Company’s business model and its financial performance and future prospects and failed to disclose the following adverse facts: (i) Angie’s List had increased its reliance on providing free memberships in order to artificially boost its subscriber figures; (ii) that contrary to Angie’s List’s repeated Class Period statements that the online reviews were unbiased because Angie’s List did not permit service providers to buy ratings on its website (“You can’t pay to be on Angie’s List”), the Company was consistently deriving more than half of its revenues from the service provider side of its business – where it relied heavily on collecting fees for listing paid service providers more prominently; (iii) that because Angie’s List sometimes charged service providers hundreds of dollars for “hot leads,” those costs were being passed along to Angie’s List subscribers, increasing the prices consumers were paying and decreasing the benefit to them of using the website; (iv) that the legitimacy of the service provider side of Angie’s List’s business model was called into question by Angie’s List’s practice of forcing service providers to pay high fees to be listed as highly rated service providers, knowing that if they did not, they would not get customer referrals from Angie’s List; (v) that because Angie’s List did not vet the service providers listed and recommended on its website, either for qualifications or for safety, many consumers were questioning the value of its recommendations, making them unwilling to continue paying outsized membership fees; and (vi) as a result of the foregoing, Defendants lacked a reasonable basis for their positive statements about the strength of Angie’s List’s business model and its business and financial prospects during the Class Period.
The Complaint alleges that through a series of disclosures between September 30, 2013 and October 24, 2013, investors learned that: (i) Angie’s List’s Chief Technology Officer had been terminated – without explanation or naming a replacement; (ii) Angie’s List had slashed membership prices by roughly 75% in several key markets, in a bid to attract new members; (iii) the Company’s third quarter 2013 financial results were much weaker than Defendants had led the market to expect, and the same declining business metrics had forced Angie’s List to issue weaker fourth quarter 2013 financial guidance; and (iv) certain analysts were questioning the Company’s ability to meet its future financial obligations. On this news, the price of Angie’s List common stock declined precipitously, erasing millions of dollars in market capitalization.
On June 16, 2014, the Clerk was directed to close cause number 1:14-cv-23-WTL-TAB and Consolidate it into 1:13-cv-2032-WTL-TAB. Plymouth’s motions to be appointed lead Plaintiff and have its selection of lead Counsel approved was Denied. Local 464A’s motion to be appointed as lead Plaintiff and have its selection of lead Counsel approved was Granted. Local 464A had the largest financial stake in the relief sought, as it suffered a loss of
approximately $271,456, more than Plymouth’s loss of approximately $74,868.49.
A consolidated Complaint was filed on August 29, 2014.
On June 18, 2015, the court issued an Order granting Defendants' motion to dismiss. Plaintiffs were given leave to file an amended Complaint. Plaintiffs declined, thus Judgment in favor of Defendants was entered on July 27.
