A CompuServe stockholder has filed a class-action suit alleging that the number-two online service failed to disclose adequate subscriber and profit information during its initial public offering in April.
Lawyers for the plaintiff Larry Romine said Monday that CompuServe and parent company H&R Block failed to announce during the company's IPO that it was already expecting a loss in both profits and subscribers. CompuServe began selling for $30 per share but is now trading in the low teens, its stock hurt both by expectation of poor quarterly earnings and a slowdown in new subscribers.
"We allege specifically that the company at the time of the offering was experiencing serious adverse trends that affected the rate of growth of subscribers to its various services and jeopardized the company's profitability," said Richard Weiss, an attorney representing Romine with New York-based Milberg Weiss Bershad Hynes & Lerach LLP. "The prospectus has to be complete and accurate, and our allegations are that because information was not disclosed that the statements in the prospectus as a whole were deceptive and misleading to investors."
CompuServe officials said they have not been contacted by lawyers and have not been served with any papers regarding the case.
Last week, the online service said it expects to post an operating loss of $14 million to $19 million in its fiscal first quarter. CompuServe shares this afternoon fell 2 points, or more than 10 percent of its total value, to close at 11-3/8.