A number of law firms commenced class action lawsuits against Heelys
Inc. following the recent drop in its share price. The suits charge
management made “false and misleading” statements in regulatory filings
for its December 2006 IPO. The involved law firms are seeking Heelys
shareholders to join the suit, and all cite similar charges. For
instance, one suit filed in Texas charges that Heelys' management in
its IPO filing “represented that Heelys had a viable, well-established
business plan and that its tremendous revenue growth and resulting
profits were based on sound business and stable sales practices.
Moreover, the registration statement failed to disclose the staggering
number of injuries suffered by Heelys' users in the months leading up
to the IPO.”
Lawyers noted that the company and certain of its senior executives and
directors sold $155 million worth of Heelys stock at $21 a share in the
IPO. The suit notes that on August 8, 2007, following the issuance of
product safety warnings by the Consumer Product Safety Commission and
others, Heelys significantly downgraded guidance for the second half of
2007, admitting that retailers were sitting on huge unsold inventory
and refusing to place additional orders. On this news, Heely's stock
fell 45%. Heelys is now trading at around $9. It has traded as high as
$40.09 and as low as $8.14.
