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THQ hit with class-action suit over alleged uDraw sales misrepresentation

THQ hit with class-action suit over alleged uDraw sales misrepresentation

Tue 19 Jun 2012 2:46pm GMT / 10:46am EDT / 7:46am PDT
BusinessLegalPublishing

THQ is accused of "materially false and misleading statements" regarding its business and prospects

THQ is in the midst of an overhaul, with new president Jason Rubin streamlining the publisher and looking to leverage its IP strengths. Unfortunately for THQ, it's also now dealing with a class-action lawsuit alleging that the company misled shareholders by holding back or misrepresenting critical sales information. A law firm had been investigating the claims only days earlier.

The complaint, filed in the US District Court for the Central District of California on behalf of shareholders by shareholder rights firm Robbins Umeda LLP, charges THQ and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Specifically, during the Class Period of May 3, 2011 to February 3, 2012, THQ is accused of "materially false and misleading" statements. The suit claims that THQ "failed to disclose adverse facts" about the uDraw product line.

It's alleged that THQ "recklessly disregarded" the following: "(a) that demand for the Company's uDraw was well below internal expectations and the Company would have to take back, or provide price protection, on hundreds of thousands of uDraw units that it had sold; (b) that the uDraw for the Microsoft Xbox 360 and Sony PlayStation 3 was a failure and not being purchased by owners of those gaming systems; and (c) as a result of the foregoing, defendants lacked a reasonable basis for their positive statements about the Company and its prospects."

The suit seeks to recover damages on behalf of all purchasers of THQ common stock during the Class Period.

THQ has been in danger of being delisted from Nasdaq for months now. The company recently requested that stockholders approve a reverse split of the company's common stock (this will be decided on June 29 at a shareholders meeting). The motion is a necessary step for the company to avoid the delisting.

7 Comments

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,271 2,440 1.1
So THQ overestimated demand for the HD version of uDraw and investors want to sue?

Invest at your own risk. If ALL the info you utilize to invest with comes from PR reports, that's your own damn fault for not putting in the homework to cover your butt.

With regards to THQ specifically, they acknowledged long ago that the HD version of uDraw was a commercial failure. If you kept investing after that, you deserve the losses.

Posted:2 years ago

#1

Tom Plunket

8 1 0.1
Certainly everyone outside of THQ knew that the direction they were trying to go with uDraw was foolish but I do believe that the powers inside of THQ honestly believed that it would be the most amazing thing ever. Suing someone for being willfully blind seems a bit dumb, the investors should accept some responsibility for not having done better due diligence.

Posted:2 years ago

#2
Well, while I cant disagree with Tom Plunket and Jim Webb, I do understand why the investors want to sue the company.
But, if you think about it, will see that theres not too much that THQ could do after the announce of the product.

Posted:2 years ago

#3

Rick Lopez Illustrator, Graphic Designer

1,269 942 0.7
Yep... Kick 'em while they are down...

I really sure hope THQ can get outta this mess. looking foward to Darksiders 2 and more Saints Row.

Posted:2 years ago

#4

Paul Shirley Programmers

178 150 0.8
"demand for the Company's uDraw was well below internal expectations"
"was a failure and not being purchased"

They aren't in trouble for getting predictions wrong, they're in trouble for not admitting they got it wrong in a timely manner. One is a job loser, the other is a lawsuit.

Posted:2 years ago

#5

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,271 2,440 1.1
Paul, they publicly stated that uDraw on the HD consoles was a failure on December 8th after their 2nd fiscal quarter and revised their 3rd quarter expectations based on it.

But uDraw on the HD consoles launched on Nov 15th. So less than one month after it launched they admitted it was a sales disaster. How is that not timely? It wasn't even an entire quarter.

Posted:2 years ago

#6

Jamie Knight International Editor in Chief, Playnation

55 24 0.4
@paul Shirley

lawsuit how exactly?

if thats the case are we then able to sue everyone for anything at any time unles it goes exactly to pre-launch plan?

right!! where's that copy of FFXIII...someone's gonna pay!

Posted:2 years ago

#7

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