Marking the one-year anniversary of an IPO is usually a jubilant time for a company and its shareholders, unless that company is VC-backed Opus360 Corp. This month, the e-business software provider has not only had a shareholder class action lawsuit dropped in its lap, but has also received notice from the Nasdaq that its stock is on the verge of being delisted.
The Rosen Law Firm P.A. filed a complaint in the United States District Court for the Southern District of New York on April 10, on behalf of shareholder Charles Bland and others who purchased shares of Opus360 from the IPO date up through Dec. 6, 2000.
The complaint charges that certain Opus360 officers and directors, as well as its underwriters and selling shareholders, violated sections 11, 12(a) (2) and 15 of the Securities Act of 1933. Underwriters Robertson Stephens, Bear Stearns, J.P. Morgan and E* Offering are named, as well as Safeguard Scientific Inc., and Compucom Systems Inc., which sold shares of the company to the public in the IPO.
The charges in the lawsuit are essentially two-fold, said Laurence Rosen, the attorney representing Bland. The suit alleges that, in its prospectus, Opus360 did not disclose that the company would run out of cash within 12 months of the IPO and was seeking additional financing. Second, it charges a failure to disclose in the prospectus that its Opus XCHANGE product did not work as claimed, contained fatal flaws and that the customer list for the product was inflated.
A spokesman from Opus360 referred to a company press release, which states Opus360 believes “that the claims are without merit” and will contest.
“These are serious risk factors that they didn’t disclose,” said Rosen, who said there was no way for shareholders to have calculated the true burn rate at the time of the IPO because the prospectus gave an annual burn rate. “The analysts reports didn’t come out until 5 weeks later,” said Rosen.
Opus360 provides e-business software that enables companies to manage and acquire skilled professionals. The company opened at $13 when it debuted April 7, 2000, after pricing at $10 the day before. Opus360 sent 7.7 million shares out to the market, but closed last Thursday at just $0.36 cents. The last time its stock traded above $1 was during the week of Jan. 31, 2001.
The company’s continuing troubles keeping its stock price afloat led Nasdaq to send Opus360 a notice on April 5 that its stock failed to comply with the minimum bid price requirement for continued listing, and is subject to delisting. The company is appealing and pending a decision from a Nasdaq listing qualifications panel, its stock will continue to trade.
In a possible attempt to ward off such an embarrassing procedure, Opus360 recently announced it signed a definitive agreement to combine with Artemis Management Systems Inc., a resource collaboration systems provider. The deal is expected to close sometime this quarter.
Contact Colleen O’Connor.