CHICAGO, Aug. 12, 2004 (PRIMEZONE) -- The deadline for purchasers of the securities of Red Hat ("Red Hat" or the "Company") (Nasdaq:RHAT) to move for lead plaintiff in a securities fraud class action brought by Much Shelist against Red Hat and certain of its officers and directors is rapidly approaching. If you purchased Red Hat securities between December 18, 2003 and July 12, 2004, inclusive ("Class Period") and you wish to be a lead plaintiff in the case, you must move to serve as lead plaintiff by filing a motion in the United States District Court for the Eastern District of North Carolina by September 13, 2004.
If you wish to discuss your rights and interests, or if you have information relevant to the lawsuit, you may contact Carol V. Gilden or Conor R. Crowley at Much Shelist Freed Denenberg Ament & Rubenstein, P.C., 1-800-470-6824, or by sending an e-mail to investorhelp@muchshelist.com. Your e-mail should refer to Red Hat.
The Complaint alleges that defendants (Red Hat, Matthew Szulik, Kevin B. Thompson, Mark Webbink, Timothy Buckley and Paul Cormier) violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. Throughout the Class Period, in each Form 10-Q and Form 10-K filed with the Securities and Exchange Commission ("SEC"), defendants falsely reported that they properly recognized revenue from subscriptions. In fact, as the market learned on July 13, they did not. Instead, defendants recognized subscription revenue on a monthly, rather than a daily, basis. For example, if a subscription agreement was signed on the last day of a month, a full month's revenue would be recognized on that day, rather than one day's worth of revenue. After the PriceWaterhouseCooper's auditor was rotated, the new auditor required recognition from subscriptions on a daily basis as required by Generally Accepted Accounting Principles ("GAAP"). This change in accounting practice resulted in the restatement of Red Hat's financial results for fiscal years 2002, 2003 and the first quarter of 2004. Defendants admitted that the restatement "is expected to result in significant percentage differences in certain items such as quarterly operating profit and net income."
During the short seven month class period, defendants Buckley and Szulik sold over $34 million and $37 million respectively of Red Hat securities, while the other defendants collectively sold an additional $8 million. As a result of defendants' allegedly fraudulent scheme, the price of Red Hat's securities was artificially inflated, allowing insiders to sell Red Hat securities for millions of dollars in proceeds and causing plaintiff and other class members to suffer damages.
The Company also announced that the SEC has made an inquiry into the Company's results as filed in their Form 10-K. On Monday, June 14, 2004, Red Hat unexpectedly announced that its Chief Financial Officer ("CFO") was resigning "to pursue other interests." The Company claims that its restatement is unrelated to its former CFO's resignation. The price of Red Hat stock plummeted $4.62 or 22.7% per share, losing $600 million in market capitalization to close at $15.73 per share.
If you purchased Red Hat securities between December 18, 2003 and July 12, 2004, and if you meet certain other legal requirements, you may no later than September 13, 2004, request that the Court appoint you as lead plaintiff. A lead plaintiff is a representative party who acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. The requirements for serving as a lead plaintiff are set forth in the Private Securities Litigation Reform Act of 1995 (15 U.S.C. Section 78u-4).
Much Shelist's history is one of experience, leadership and results. For more than 25 years, Much Shelist has represented plaintiffs in class action litigation in federal and state courts across the United States. The firm has successfully prosecuted cases involving securities fraud, antitrust violations, consumer fraud, unlawful business practices and insurance company fraud. Under Much Shelist's leadership, class members have obtained judgments and settlements in excess of $4 billion.