The law firm of Milberg Weiss Bershad & Schulman LLP announces that an amended class action lawsuit was filed on July 21, 2005, on behalf of purchasers of the securities of DreamWorks Animation SKG Inc. that extends the Class Period. The previous Class Period was from October 28, 2004, to May 10, 2005. The new Class Period is from October 28, 2004, to July 11, 2005.
The action is pending in the U.S. District Court for the Central District of California against DreamWorks, Ann Daly (coo), Jeffrey Katzenberg (ceo) and Kristina M. Leslie (cfo). The amended complaint adds as additional defendants DreamWorks directors Paul G. Allen and David Geffen. A copy of the amended complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss's website at www.milbergweiss.com.
The complaint alleges that defendants made materially false and misleading statements with respect to DreamWorks's sales of SHREK 2 home video units that dramatically inflated the price of DreamWorks's common shares. At the commencement of the Class Period, on October 28, 2004, in the prospectus issued in connection with DreamWorks's initial public offering, defendants claimed that they estimated the future returns of unsold home video units based on enumerated factors. Three days after the Nov. 5, 2004, release of the SHREK 2, the company proclaimed that the release had given "retailers a fairytale beginning to the holiday season."
The complaint alleges that on Jan. 3, 2005, defendants stated that they had already sold 37 million home video units and, thereafter, variously projected sales of 40 million and 55 million SHREK 2 home video units by the end of the first quarter of 2005. Both before and during the Class Period, defendants assured investors that they had in place procedures that enabled them to track home video unit sales and that they were capable of establishing reserves for returned home video units based on actual sales data and "their historical experience with similar types of sales."
The complaint further alleges that the defendants flooded the market with SHREK 2 and reported corresponding sales and revenues for each shipped unit, all the while knowing or recklessly disregarding that: (a) the company could not sustain the high rate of initial sales; (b) a material number of home video units were and would be returned and that, therefore, (c) defendants' statements with respect to both the present and projected volume of sales were materially false and misleading.
The complaint alleges that the truth began to emerge on May 10, 2005. On that date, the company was forced to announce that SHREK 2 home video sales had fallen well short of forecasts of sales of at least 40 million, that the company was not reporting any first-quarter revenue attributable to sales of SHREK 2 home video units and that the company's first quarter net income would be $46 million, or $0.44 per share, on revenue of $167 million a far cry from company-sponsored and endorsed analyst estimates of $0.58 per share. On this news, DreamWorks's share price tumbled 15.6%, from a closing price of $36.50 on May 10, 2005, to a low of $30.80 on May 11, 2005.
The Class Period ends on July 11, 2005, when the defendants announced that DreamWorks would lose as much as $0.09 per share in the second quarter of 2005 primarily as a result of weak SHREK 2 video sales and that the SEC had queried the company with respect to DreamWorks's insider sales shortly before the May 10, 2005, disclosure of the shortfall in SHREK 2 sales. On this news, DreamWorks shares fell 15%, trading as low as $22.80 per share, down over $4 from the prior day's closing price.
Insiders, including several of the defendants named herein, profited handsomely from defendants' materially false and misleading statements during the Class Period, having sold shares of DreamWorks's stock for proceeds of more than $140 million.
Milberg Weiss Bershad & Schulman LLP is a firm with more than 100 lawyers with offices in New York City, Los Angeles, Boca Raton, Delaware, and Washington, D.C. and is active in major litigations pending in federal and state courts throughout the U.S.