Settlement Is Reported in Lawsuit Against Kaypro
Kaypro is expected to announce a settlement today to a class action suit that accused company officers of fraudulently inflating the company’s revenue and earnings predictions before a $40-million initial public offering in August, 1983.
The suit, filed in U.S. District Court in San Diego, alleges that Kaypro “projected the image of a technologically advanced, well-managed, and highly successful growth company” when it in fact was anticipating “essentially flat earnings from the past year.”
When Kaypro went public on Aug. 25, 1983, it sold 4 million shares of common stock for $10 per share. The stock subsequently tumbled to about $1.50 per share and only last week rose to $2 per share, when the company announced it had returned to profitability.
The class action suit claims that bad management practices kept Kaypro from using the public offering to finance the development and marketing of its future business. Kaypro also suffered from increased inventory that piled up when the company was unable to sell its existing products.
On Monday, neither Kaypro nor attorneys for the various plaintiffs’ groups would discuss the anticipated settlement.
In past Securities and Exchange Commission filings, Kaypro declined to estimate its liability and did not discuss whether its insurance would cover a settlement.
The class action suit also names Prudential-Bache Securities, which was the lead underwriter in Kaypro’s offering, and Peat, Marwick, Mitchell & Co., which served as Kaypro’s auditor. Attorneys representing those firms were not available for comment Monday.
Last week, Kaypro announced a return to profitability with a net profit of $944,226 and revenue that jumped 53% to $22.7 million for the fourth quarter ended Aug. 29. Kaypro suffered a $9.4-million loss during the same quarter a year ago.
Kaypro also reported a $38,925 net profit and revenue that rose 3% to $77.9 million for the year ended Aug. 29. The company reported a $15.5-million net loss during fiscal 1985.
