A class action lawsuit has been filed against Silicon Graphics (SGI) accusing the company of making false and misleading statements that inflated the stock price for insider trading.
The suit was filed in a California court on behalf of anyone who purchased SGI common stock between July 24 and Oct. 6.
The complaint alleges that unnamed defendants made false and misleading statements about SGI's business and financial results in order to artificially inflate the price of SGI stock. Meanwhile, defendants sold 286,584 shares of their SGI stock for a US$7.4 million gain, the lawsuit alleges.
After the company completed the exchange of convertible debt and after the stock was sold, SGI revealed that it had fired CEO and Chairman Edward McCracken and would restructure its organization. At the time SGI also said that its strong fourth-quarter results were generated from pulling orders in from future quarters. Consequently, SGI expected a revenue shortfall in the first quarter of fiscal 1998 and beyond, according to the lawsuit.
In the wake of SGI's statements, the company's stock price dropped to less than $14 per share from a high of $30 5/16, the lawsuit claims.
A spokesman for SGI did not immediately return a call seeking comment.