- Company Name
- Synacor, Inc.
- Stock Symbol
- Class Period
- May 4, 2016 to March 15, 2018
- Motion Deadline
- June 3, 2018
- Southern District of New York
The complaint charges Synacor and certain of its officers with violations of the Securities Exchange Act of 1934. Synacor operates as a technology development, multi-platform services and revenue partner for video, Internet and communications providers, as well as device manufacturers, governments and enterprises. On May 4, 2016, Synacor announced that it had secured a three-year contract to host web and mobile services for AT&T Inc. (the “AT&T Contract”).
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose adverse information regarding the Company’s business and operations, including that Synacor was unlikely to receive significant revenues from the AT&T Contract until 2018, and as a consequence, the Company’s revenue forecasts issued during the Class Period were materially false and misleading. As a result of defendants’ false statements and/or omissions, Synacor securities traded at artificially inflated prices during the Class Period, with its shares trading at prices above $4 per share.
On August 9, 2017, Synacor issued a press release announcing its financial results for the quarter ended June 30, 2017. The press release quoted the Company’s CEO, Himesh Bhise, as follows: “‘[T]he joint AT&T-Synacor team has made the strategic decision to prioritize portal engagement right now over monetization. We are seeing the results of this focus in deeper engagement metrics. We are already generating revenue from this new consumer experience, but we expect that additional monetization tactics will be turned on at a more deliberate pace, which will result in a longer ramp to full monetization. As a result, a significant portion of the revenue that we were expecting in [the third and fourth quarters] this year is delayed to 2018, and we are adjusting our financial guidance for 2017 accordingly. We believe that this engagement-focused strategy ultimately leads to a stronger, more sustainable business.’” On this news, Synacor’s share price fell $1.15 per share, or more than 32%, to close at $2.40 per share on August 10, 2017.
Then on March 15, 2018, after the market closed, Synacor held a conference call with analysts and investors to discuss the Company’s fourth quarter earnings. During the call, defendant Bhise discussed the shortcomings of the AT&T Contract, stating that “in the last three quarters of 2017, we generated approximately $25 million in revenue from AT&T. We are expecting that AT&T will continue to focus on consumer experience, and as such, our guidance reflects the annualized 2017 run rate. Clearly, this forecast is below the $100 million annual revenue target that AT&T and Synacor announced when we first discussed the [AT&T C]ontract and was a critical element of Synacor’s $300 million 2019 target.” On this news, Synacor’s share price fell more than 14%, to close at $1.75 per share on March 16, 2018.