Investor Sues, Saying Firm Inflated Stock
Pacific Scientific Co. said Thursday that it has been hit with an investor lawsuit alleging that the company and its chief executive made misleading statements about a line of fluorescent lightbulbs and related devices touted as a breakthrough that would propel the company’s sales to record heights.
The complaint, filed in U.S. District Court in Santa Ana, alleges that the Newport Beach-based company’s stock was “artificially inflated” for nearly two years on management promises that its Solium technology would revolutionize the lighting industry by overcoming the drawbacks of fluorescent lighting.
Among other claims, the company said the technology could be used to control the brightness of fluorescent lights and would boost the company’s annual sales by $50 million to $100 million a year. The product line has never lived up to expectations, the suit claims.
The company denies any wrongdoing and plans a vigorous defense, said Chief Executive Edgar S. Brower.
The suit, brought by investor Sheldon Kriegel of New York, seeks class-action status for several thousand investors who bought Pacific Scientific’s stock between October 1994 and July 1996. A lawyer for Kriegel said plaintiffs hope to recover millions of dollars in damages.
In the fall of 1994, the company’s stock doubled in price to $23.75 after Pacific Scientific announced plans to launch the product. In July, when the company revealed that the product wasn’t living up to expectations, the stock began to retreat. It closed Thursday at $11.125, up 25 cents in trading on the New York Stock Exchange.
Brower attributed the product’s problems to faulty engineering and said the company had to make a costly return to the drawing board. He said the company has been forthcoming with both good and bad news.
The company also designs, makes and markets other electrical and safety equipment for a broad range of applications. Last year, it earned $12.8 million on revenue of $284.8 million.
