Cree faces shareholder class-action lawsuits
The class action lawsuits charge that Cree s stock price was artificially inflated by a number of false statements to the marketplace. Some of these statements formed part of Eric Hunter s lawsuit, including the allegation that Cree had intentionally oversold product to C3 Corporation to artificially inflate Cree s income and stock price.
The class action lawsuits also claim that in January 2000 Cree filed a prospectus and registration statement in connection with the offering of 2.86 million shares of common stock. The prospectus failed to disclose that Cree would invest $5 million of the offering proceeds in World Theatre, Inc., a speculative start-up company in which Eric Hunter was a substantial shareholder.
In addition, in December 2000, Cree bought the UltraRF division from Spectrian Corporation for approximately 908,000 shares of Cree common stock and $30 million in cash. Cree falsely told the market UltraRF would be accretive to earnings and that, as part of the acquisition, Spectrian would enter into a 2-year supply agreement requiring it to buy semiconductor parts from Cree.
Spectrian was required to purchase, however, only if Cree sold product to it at the lowest available commercial price, a fact that Cree did not disclose. Although the UltraRF division continued to lose money for Cree, a write-down for the division s goodwill was delayed until March 2002, when Cree announced that it would take a $60-$77 million goodwill write-down for the division.