NEWS - Tuesday, July 19, 2005
Majesco Faces Class Action Suit
Majesco Faces Class Action Suit Majesco, which earlier this month changed its earnings outlook to predict severe losses, now faces a class-action lawsuit related to the sudden downturn. Spearheaded by law firm Chitwood Harley Harnes LLP, the proposed class action suit names Majesco, former CEO Carl Yankowski, and former CFO Jan E. Chasen as defendants. The suit, which covers the period from December 8, 2004 and July 12, 2005, claims that the games company issued "a series of materially false and misleading statements," effectively inflating the market price of its securities. According to Chitwood Harley Harnes, the defendants "touted the diversification of Majesco's product line and stated that the Company's revenue and income would significantly increase in fiscal year 2005." The suit claims that the predicted revenue increase was unreasonable, as the company was relying on the success of just one game, and was improperly accounting for development costs. The firm claims that "the truth emerged on July 12," when Majesco adjusted its earnings from $16 to $18 million in income to a loss of $16 to $19 million. The same day, Majesco announced that Yankowski had resigned as CEO. By July 13, the company's shares fell 48% to $3.56. Earlier this year, Majesco released Psychonauts and Advent Rising, both of which were key titles for the company. For its part, Psychonauts won critical praise, but it isn't clear that the title has made much impact at retail.Source: http://www.ign.com
