| Company: | LeapFrog Enterprises Inc. |
| Ticker Symbol: | NYSE: LF |
| Class Period: | August 20, 2003 to October 21, 2003 |
| Court: | Northern District, CA |
| Date Filed: | Dec-02-03 |
| Lead Plaintiff Deadline: | Jan-31-04 |
| Allegations: |
A class action has been commenced in the United States District Court for the Northern District of California on behalf of purchasers of LeapFrog Enterprises Inc. ("LeapFrog") (NYSE:LF) common stock during the period between August 20, 2003 and October 21, 2003 (the "Class Period").
The complaint charges LeapFrog and certain of its officers and directors with violations of the Securities Exchange Act of 1934. LeapFrog's biggest retail product is its family of LeapPad products which are hand-held and lap-top electronic platforms that are sold with a variety of content books that utilize game and entertainment technologies to teach reading, writing and math skills. Having successfully cornered its niche market of electronic educational toys which had been largely abandoned by the other major toy companies, by 2003 LeapFrog was the third largest overall U.S. toy manufacturer, only behind industry leaders Hasbro and Mattel. Mattel's Fisher Price launched its own version of the LeapPad on July 10, 2003, called "PowerTouch," which mimicked LeapPad and was designed to capture LeapFrog's market monopoly, utilizing Mattel's superior marketing abilities.
The complaint alleges that based on the Company's repeated bullish statements, throughout the Class Period Bear Stearns and the Company's other analysts continually reiterated the $0.61 per share earnings guidance and the other guidance provided by LeapFrog. These projections were not disputed by LeapFrog and were based in large part on LeapFrog's own 3Q'03 sales projections of $225-$235 million, its projected gross profit margin of 52%-53%, and it's projected operating income of $54-$57 million, which were also being reiterated. These projections, coupled with the Company's bullish statements, sent the Company's shares soaring to a Class Period high of over $47 per share on October 21, 2003, from $34 per share on August 20, 2003, or a 35% increase.
The true facts which were then known by each of the defendants, but concealed from the investing public during the Class Period, were that: (a) Throughout 3Q'03, retailers were not placing the level of orders defendants expected as part of the typical pre-Christmas inventory build-up; (b) Retailers were also refusing to allow LeapFrog to ship some of the orders they did place during 3Q'03, instead requiring LeapFrog to bear the risk of holding the product into the Christmas selling season in the 4Q'03 to see if the new products gained customer acceptance and to see how well they competed against Mattel's PowerTouch; (c) Defendants were not replenishing LeapFrog's own inventory throughout the Class Period or making expenditures in anticipation of their projected sales; and (d) Defendants knew during the Class Period that Mattel's launch of PowerTouch had severely damaged LeapFrog and diminished its market share, causing the Company to file an action seeking injunctive relief against Mattel on October 6, 2003 (one week after the close of LeapFrog's 3Q'03 but more than two weeks before its 3Q'03 results would be released), claiming LeapFrog would be "irreparably injured" unless the court stopped Mattel from selling its PowerTouch.
After the close of the market on October 21, 2003, with more than $18 million of insider trading proceeds, defendants released the Company's 3Q'03 financial results which fell materially short of their earlier projections. Knowing investors would punish the stock, trading was halted before the press release was issued. LeapFrog reported actual sales of $204 million, about 11% below the Company's own guidance of $225-$235 million. The Company's earnings were $0.55 per share instead of $0.61 per share as analysts had projected based on the Company's sales guidance. LeapFrog also missed its own projected gross profit margin of 52%-53%, coming in at only 51.4% and missed its own operating income target of $54-$57 million, coming in at only $52.6 million.
If you acquired the securities of the defendants during the Class Period you may, no later than Jan-31-04, request that the Court appoint you as lead plaintiff through counsel of your choice. You may also choose to remain an absent class member. A lead plaintiff must meet certain requirements.
The complaint charges LeapFrog and certain of its officers and directors with violations of the Securities Exchange Act of 1934. LeapFrog's biggest retail product is its family of LeapPad products which are hand-held and lap-top electronic platforms that are sold with a variety of content books that utilize game and entertainment technologies to teach reading, writing and math skills. Having successfully cornered its niche market of electronic educational toys which had been largely abandoned by the other major toy companies, by 2003 LeapFrog was the third largest overall U.S. toy manufacturer, only behind industry leaders Hasbro and Mattel. Mattel's Fisher Price launched its own version of the LeapPad on July 10, 2003, called "PowerTouch," which mimicked LeapPad and was designed to capture LeapFrog's market monopoly, utilizing Mattel's superior marketing abilities.
The complaint alleges that based on the Company's repeated bullish statements, throughout the Class Period Bear Stearns and the Company's other analysts continually reiterated the $0.61 per share earnings guidance and the other guidance provided by LeapFrog. These projections were not disputed by LeapFrog and were based in large part on LeapFrog's own 3Q'03 sales projections of $225-$235 million, its projected gross profit margin of 52%-53%, and it's projected operating income of $54-$57 million, which were also being reiterated. These projections, coupled with the Company's bullish statements, sent the Company's shares soaring to a Class Period high of over $47 per share on October 21, 2003, from $34 per share on August 20, 2003, or a 35% increase.
The true facts which were then known by each of the defendants, but concealed from the investing public during the Class Period, were that: (a) Throughout 3Q'03, retailers were not placing the level of orders defendants expected as part of the typical pre-Christmas inventory build-up; (b) Retailers were also refusing to allow LeapFrog to ship some of the orders they did place during 3Q'03, instead requiring LeapFrog to bear the risk of holding the product into the Christmas selling season in the 4Q'03 to see if the new products gained customer acceptance and to see how well they competed against Mattel's PowerTouch; (c) Defendants were not replenishing LeapFrog's own inventory throughout the Class Period or making expenditures in anticipation of their projected sales; and (d) Defendants knew during the Class Period that Mattel's launch of PowerTouch had severely damaged LeapFrog and diminished its market share, causing the Company to file an action seeking injunctive relief against Mattel on October 6, 2003 (one week after the close of LeapFrog's 3Q'03 but more than two weeks before its 3Q'03 results would be released), claiming LeapFrog would be "irreparably injured" unless the court stopped Mattel from selling its PowerTouch.
After the close of the market on October 21, 2003, with more than $18 million of insider trading proceeds, defendants released the Company's 3Q'03 financial results which fell materially short of their earlier projections. Knowing investors would punish the stock, trading was halted before the press release was issued. LeapFrog reported actual sales of $204 million, about 11% below the Company's own guidance of $225-$235 million. The Company's earnings were $0.55 per share instead of $0.61 per share as analysts had projected based on the Company's sales guidance. LeapFrog also missed its own projected gross profit margin of 52%-53%, coming in at only 51.4% and missed its own operating income target of $54-$57 million, coming in at only $52.6 million.
If you acquired the securities of the defendants during the Class Period you may, no later than Jan-31-04, request that the Court appoint you as lead plaintiff through counsel of your choice. You may also choose to remain an absent class member. A lead plaintiff must meet certain requirements.
If you feel you qualify for damages or remedies that might be awarded in this class action please fill in our form on the right to submit your complaint.
If your injustice does not match the complaint described above, please use this form to register your complaint. Thank you.
