Shares plummet as AXT faces lawsuit
A lawsuit against the US-based substrate manufacturer AXT has been filed with the US District Court on behalf of AXT s shareholders. The allegations have been made by several US law firms, including Schatz & Nobel, P.C., Glancy Binkow & Goldberg LLP, and the Law Offices of Charles J. Piven.
The complaint alleges that AXT violated securities laws by making false and misleading statements between February 6, 2001 and April 27, 2004, and inflicted damages on investors.
This announcement has had a dramatic effect on the company s share price, which fell on Monday 18 October from $1.90 to $1.49, before slightly recovering to close at $1.53.
It appears that it was the rapid drop in share price earlier this year which has prompted the recent action by shareholders. Over 28 and 29 April, AXT s share price fell from $3.30 to $2.20 after it was disclosed that the company was not complying with certain product testing requirements (see related story). An investigation followed before AXT belatedly announced its first quarter 2004 results.
AXT, and Morris Young, its CEO and Chairman for the period under investigation, are accused of artificially inflating AXT s stock price by providing false and misleading financial information, and giving untruthful statements concerning the company s fulfillment of its customers requirements.
Young, still with the company but now holding a role within its operation in China, is also charged with exploiting an artificially inflated share price by cashing-in on $5 million worth of personally-held AXT shares.
The complaint also seizes upon the increase in reserve for sales returns by $745,000, reported in AXT s first quarter 2004 results, as an "admission that previously recognized revenue on the sale of products was not merchantable". It continues by claiming that AXT s revenue recognition policies were "false and misleading, and violated Generally Acceptable Accounting Principles".
