NEW YORK, July 15, 2004 (PRIMEZONE) -- Wechsler Harwood LLP announces that it has been retained to file a federal securities fraud class action against Red Hat, Inc. ("Red Hat" or the "Company") (Nasdaq:RHAT), Matthew J. Szulik, Kevin B. Thompson, Timothy J. Buckley, Paul J. Cormier, and Mark H. Webbink on behalf of purchasers of RHAT securities, during the period between March 19, 2002 and July 12, 2004 (the "Class Period").
If you have questions about this case or wish to inquire about your rights in connection with this matter, you may contact us through our website, at www.whesq.com. Any member of the class who desires to be appointed lead plaintiff in the class action must file a motion with the Court no later than September 13, 2004 on their own or through counsel of their own choice. Class members must meet certain legal requirements to serve as a lead plaintiff. Please feel free to contact Virgilio Soler at Wechsler Harwood LLP, who will, without obligation or cost, attempt to answer questions concerning your rights with respect to this matter. You may also choose to do nothing and remain an absent class member.
The complaint will charge defendants with issuing a series of material misrepresentations to the market during the Class Period in violation of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5. Among other things, the complaint alleges that, during the Class Period, Defendants: (i) engaged in a scheme to defraud Red Hat's investing public by prematurely recognizing revenue from subscriptions in violation of Generally Accepted Accounting Principles ("GAAP"); (ii) misrepresented its net income and financial results; (iii) misrepresented that its financial statements were prepared in accordance with GAAP; and (iv) reported enormous profits by selling over $77 million worth of personally held stock at artificially inflated prices as a result of Defendants' fraud on the market.
On July 13, 2004, Defendants revealed that they would be restating financial results for fiscal years 2002, 2003, 2004 and the first quarter of 2004 as a result of the change in the way they recognized revenue from subscriptions, noting that they would now be recognizing revenue from subscriptions on a daily basis rather than on a monthly basis. The restatement, Defendants have admitted, "is expected to result in significant percentage differences in certain items such as quarterly operating profit and net income." As at least one analyst has said, this situation "raises questions about the company's financial controls and infrastructure."
The Company also announced that the Securities and Exchange Commission (the "SEC") had made an inquiry into the Company's results for one year, though the basis for the inquiry has not yet been fully disclosed. Notably, on June 14, 2004, Red Hat announced unexpectedly that its Chief Financial Officer ("CFO") was planning to resign "to pursue other interests." The Company claims that its restatement is unrelated to its CFO's resignation.
The market reacted negatively to the impending restatement and the SEC inquiry, which news alone resulted in a loss of market capitalization for Red Hat of over $600 million. The stock closed at $15.73 per share, which was $4.62 or 22.7% down from the previous day's close at $20.35. Over 55 million shares traded hands on yesterday's news.
Wechsler Harwood, which has extensive experience in prosecuting investor class actions involving financial fraud, has prosecuted securities, antitrust and consumer class actions for over 10 years. For more information about Wechsler Harwood LLP, please visit its website.
If you wish to discuss this action with us, or have any questions concerning this notice or your rights and interests with regard to the case, please contact the following:
Wechsler Harwood LLP 488 Madison Avenue, 8th Floor New York, New York 10022 Toll Free Telephone: (877) 935-7400 Virgilio Soler, Jr., Wechsler Harwood Shareholder Relations Department: vsoler@whesq.com