Silicon Graphics faces suits
The company is slapped with three virtually identical class-action lawsuits alleging that the company artificially inflated its stock price.
Since Tuesday, the high-end graphics and workstations company has been slapped with four virtually identical class-action lawsuits on behalf of four separate law firms.
Each suit alleges that the company and its executives attempted to artificially inflate SGI's stock price and took the gains on the rising value, only to later make disclosures of a less-than-rosy financial picture that led to sinking stock prices during the period between July 24 and October 6.
During that period, the company's stock dropped 23 percent, to 18-1/16, from 23-1/4. Since the close of the class period, the stock has continued to fall, ending today at 13-11/16.
The complaints allege that certain of SGI's former and current officers and directors made false and misleading statements about the company's business and financial results to artificially inflate the price of its stock, in an effort to promote the exchange of a SGI convertible security for $200 million worth of outstanding zero coupon debentures.
During the period, the complaints alleged, the defendants sold 286,584 shares of their stock, which generated $7.4 million in proceeds.
The suits also noted that, after Silicon Graphics completed its exchange of convertible debt and the insiders sold their stock, the company later announced that its strong fourth-quarter fiscal 1997 results were the result of pulling orders in from future quarters and that the next several quarters would suffer a revenue shortfall.
In addition, Silicon Graphics also disclosed later that its chairman and CEO, Edward McCracken, would step down and that the company would be restructuring its organization through the layoffs of up to 1000 employees, 850 of which have since been let go.
The suits, filed in U.S. District Court in Northern California, are being orchestrated by Milberg Weiss, Wolf Popper LLP, and Spector & Roseman, P.C., and now Barrack, Rodos & Bacine.
"Based on what we have seen, we believe the legal action taken against the company has no merit, and [we] will defend against it vigorously," Silicon Graphics spokesman John Cristofano said, referring to the Milberg Weiss case filed yesterday. He said the company has been served with only one of the three suits so far, and thus could not yet comment on the other actions filed today.
The plaintiffs seek to recover damages on behalf of all purchasers of Silicon Graphics common stock during the class period. None of the attorneys filing the suits could immediately be reached for comment today.
Silicon Graphics has managed to stave off class-action suits before. Earlier this year, a federal judge in California dismissed for a second time a shareholder class-action case brought against SGI.
In that case, the judge cited Congress's adoption of a more stringent standard for class-action suits. That new law required plaintiffs to demonstrate that a defendant deliberately acted fraudulently, moving the burden of proof beyond a plaintiff merely alleging false or misleading statements.