Legal vultures circle STEC after overstock admission
Who knew what, when?
At least four law firms are flying class action kites alleging STEC misled investors by a late announcement of EMC's overstocking of SSD inventory. They are looking for disgruntled investors to join in and give STEC a good kicking.
STEC is the solid state disk supplier (SSD) that dominates the enterprise flash disk market and has effective monopoly supply of Fibre Channel interface SSDs into EMC, Dell, Compellent, IBM, Sun and other storage array suppliers.
The lawyers allege STEC has possibly/probably violated federal securities law. They cite investors' current losses, with shares now trading at $13.13, down from $23.25 on November 3 when the results mentioning the EMC overstock were announced. Even then the shares were down from September's high of $41.84 on competition worries. The shares have lost 68.6 per cent of their value since September's peak.
Highlighting investors' losses are STEC directors' own share sales in August, when the shares were trading at $31.00. STEC CEO Manoush Moshayedi and president Mark Moshayedi sold nine million shares then, making $279m.
Four firms of legal eagles, or vultures - pick your own classification - are soliciting support from STEC investors so they can activate class actions, win huge damages for investors and make a modest return, ahem, on their own investment of time.
Disgruntled investors can pick between Glancy Binkow & Goldberg LLP, the Kendall Law Group, Kahn Swick & Foti, and The Brualdi Law Firm. All four are poring over STEC's SEC filings to see if they can pick a hole big enough to let them through.
The core of any case is likely to be whether STEC directors knew about the EMC overstock of the ZeusIOPS SSD long before the mention in the STEC quarterly results statements and call. Early knowledge by the directors of the slow sales ramp at IBM and Sun would also be promising.
If the legal velociraptors could find evidence of either of these things around the time the Moshayedis sold their shares, then they have their smoking gun and could be in line for a big bucks win. ®