BlackBerry won a case in the U.S. District Court in Manhattan, convincing the authorities that it has not artificially inflated its stock price, says a report from Reuters. The Canadian company was accused of painting a false picture of market enthusiasm around BlackBerry 10 smartphones that drove the share price on the index.
No evidence against BlackBerry
Judge Thomas Griesa noted that the litigants failed to establish that BlackBerry executives made false claims to shoot up the stock price and defraud investors. Shareholder Marvin Pearlstein filed the original lawsuit in early October 2013.
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Griesa ruled that the company’s assertions about the devices are far from being legally misleading, and “even a poor-selling device may still be embraced by customers and may still mark a transition for the company.” The judge stated that nowhere in the entire case could the plaintiff prove that the company’s accounting practices were wrong.
Pearlstein and other shareholders alleged that BlackBerry exaggerated the performance of BlackBerry 10 and faked its books by recording revenue too quickly, and waiting too long to write off unsold inventory.
About the case
The lawsuit contains a statement from BlackBerry that the company is “progressing on its financial and operational commitments.” The Canadian smartphone maker also announced that it is receiving overwhelming response from app developers, according to the lawsuit. BlackBerry 10, however, did not sit very well in the market, compelling the company to lay off around 4,500 employees,which was around 40% of its local workforce, according to the complaint.
Sales for Blackberry 10 devices dropped, resulting in an estimated $930 million write-down for unsold inventory on Sept. 20, 2013, thus lowering the share value to around one-sixth of its previous value. The Canadian smartphone maker showed an exit door to its chief executive officer, Thorsten Heinz, less than two months later.
There is a fair chance the claims by the plaintiff hold truth, but then there was no clear connection between any allegedly fraudulent statements by BlackBerry management and the company’s stock price.
The case is Pearlstein et al v. BlackBerry Ltd et al, U.S. District Court, Southern District of New York, No. 13-07060.