Uniroyal faces class action lawsuit
The action alleges that the defendants violated sections of the Securities Exchange Act by making materially false and misleading statements to the market between February 8, 2000 and May 13, 2002. According to the complaint, the defendants issued a series of press releases over this period touting Uniroyal’s financial stability and its acquisition of Sterling Semiconductor while stating that the company was "strategically positioning [itself] to increase its participation in the fast growing compound semiconductor industry through internal growth".
According to the complaint, buyers of Uniroyal stock during the period concerned were unaware that Uniroyal was not financially stable, that the acquisition of Sterling was not lucrative at all, and that the acquisition was not in fact strategically positioning Uniroyal to increase its participation in the explosive compound semiconductor industry.
The law firm continues by claiming that, without Uniroyal’s financial support, Sterling would probably have been forced to seek protection under bankruptcy laws. The complaint alleges that Sterling was a development stage company and not, as the defendants said, "a leading developer of SiC technology and materials." Moreover, the complaint alleges that in order to inflate Uniroyal’s net worth and further foster the illusion of growth, the defendants agreed to pay an inflated price for Sterling with overvalued stock serving as currency.
On December 31, 2001, 18 months after the Sterling acquisition in exchange for stock with a purported value of more than $40 million, Uniroyal recorded a write-down of Sterling goodwill of approximately $9,816,000.
By January 2 of this year Uniroyal stock had closed at $1.69, down from $3.20 the previous day and substantially down from its high of $71.125 during the period concerned, which was attained on February 23, 2000. Last month, a deal between Uniroyal and Umicore to buy the assets of Sterling Semiconductor fell through during the due diligence period, and Uniroyal was delisted from the Nasdaq exchange.
