DreamWorks Animation Target Of Hldr Lawsuit
DOW JONES NEWSWIRES
June 2, 2005 6:49 p.m.
NEW YORK -- A law firm filed a purported class action lawsuit charging DreamWorks Animation SKG Inc. (DWA) with hiding news of weaker-than-expected Shrek 2 DVD sales to inflate its stock price.
In a press release Thursday, New York-based law firm Abbey Gardy LLP said DreamWorks failed to disclose that Shrek 2 DVD sales were falling rapidly, leading retailers to return large chunks of inventory.
The lawsuit further charges DreamWorks with making DVD shipments that far outpaced actual demand.
After a record-breaking DVD launch, DreamWorks disclosed the problems on May 10, saying that the overshipment led DreamWorks to post first-quarter Shrek 2 revenue only from merchandising and licensing, The Wall Street Journal reported. Following the disclosure, stock fell 25%.
Shrek 2 sold 33.7 million DVD and VHS copies in its first eight weeks after a November launch, but sold only 1.3 million during the entire first quarter. DreamWorks had predicted that Shrek 2 would sell 40 million copies by the end of the first quarter, The Wall Street Journal reported.
DVD sales throughout the industry are fading at faster rates as the nascent market matures.
In addition to DreamWorks Animation, the lawsuit named Chief Executive Jeffery Katzenberg and Chairman Roger Enrico.
Due to the Shrek 2 shipment problems, the law firm alleges that DreamWorks' current and future earnings lack a "reasonable basis."
For the first quarter, DreamWorks earned $45.7 million, or 44 cents a share, on revenue of $167 million.
The law firm invites shareholders between Oct. 27, 2004 and May 10, 2005, to join the lawsuit or act a lead plaintiff.
A DreamWorks representative wasn't immediately available for comment.
Shares of DreamWorks traded at $36.50 before disclosure on May 10 of the Shrek 2 DVD sales. Recently, the stock traded at $29.67, down 43 cents, or 1.4%, in New York Stock Exchange composite trading.
-Jerry Abejo; Dow Jones Newswires; 201-938-5400; AskNewswires@dowjones.com
Reached later, a DreamWorks Animation spokesman said the company plans to defend the lawsuit, but declined further comment.
DOW JONES NEWSWIRES
June 2, 2005 6:49 p.m.
NEW YORK -- A law firm filed a purported class action lawsuit charging DreamWorks Animation SKG Inc. (DWA) with hiding news of weaker-than-expected Shrek 2 DVD sales to inflate its stock price.
In a press release Thursday, New York-based law firm Abbey Gardy LLP said DreamWorks failed to disclose that Shrek 2 DVD sales were falling rapidly, leading retailers to return large chunks of inventory.
The lawsuit further charges DreamWorks with making DVD shipments that far outpaced actual demand.
After a record-breaking DVD launch, DreamWorks disclosed the problems on May 10, saying that the overshipment led DreamWorks to post first-quarter Shrek 2 revenue only from merchandising and licensing, The Wall Street Journal reported. Following the disclosure, stock fell 25%.
Shrek 2 sold 33.7 million DVD and VHS copies in its first eight weeks after a November launch, but sold only 1.3 million during the entire first quarter. DreamWorks had predicted that Shrek 2 would sell 40 million copies by the end of the first quarter, The Wall Street Journal reported.
DVD sales throughout the industry are fading at faster rates as the nascent market matures.
In addition to DreamWorks Animation, the lawsuit named Chief Executive Jeffery Katzenberg and Chairman Roger Enrico.
Due to the Shrek 2 shipment problems, the law firm alleges that DreamWorks' current and future earnings lack a "reasonable basis."
For the first quarter, DreamWorks earned $45.7 million, or 44 cents a share, on revenue of $167 million.
The law firm invites shareholders between Oct. 27, 2004 and May 10, 2005, to join the lawsuit or act a lead plaintiff.
A DreamWorks representative wasn't immediately available for comment.
Shares of DreamWorks traded at $36.50 before disclosure on May 10 of the Shrek 2 DVD sales. Recently, the stock traded at $29.67, down 43 cents, or 1.4%, in New York Stock Exchange composite trading.
-Jerry Abejo; Dow Jones Newswires; 201-938-5400; AskNewswires@dowjones.com
Reached later, a DreamWorks Animation spokesman said the company plans to defend the lawsuit, but declined further comment.