Angie’s List’s CEO William Oesterle and four other top executives made a series of false or misleading statements about the company’s prospects that inflated its stock price earlier this year as they sold $13 million of their own shares, a lawsuit seeking class-action status alleges.
Bringing the case on behalf of shareholders Eva and Harold Baron is Robbins Geller Rudman & Dowd LLP, a national securities litigation firm that led $7.3 billion in settlements for former investors of scandal-plagued energy giant Enron Corp.
Robbins Geller said it filed the suit on Monday in U.S. District Court for the Southern District of Indiana.
The suit alleges multiple violations of federal securities regulations and seeks unspecified financial damages on behalf of common shareholders between Feb. 14 and Oct. 23 of this year.
The 27-page complaint said Oesterle was the biggest benefactor, selling 486,400 shares for a net $10.4 million.
It wasn’t immediately clear if the stock sales were required per terms of the executives' stock option plans, however.
Also listed as defendants are co-founder and chief marketing officer Angela Hicks Bowman; controller Charles Hundt; former chief financial officer Robert R. Millard; and former chief technology officer Manu Thapar.
Broadly, the suit recounts a litany of positive statements made by Oesterle and other executives during earnings calls and in presentations to analysts and shareholders.
In fact, the Indianapolis-based firm that provides reviews of service providers (such as plumbers and roofers) by its members exceeded analysts' expectations during much of 2013.
“Based on the positive mantra” of executives, the suit alleges, Angie’s stock price hit a high of $28 last July. At the same time, executives were selling shares, “with the price of the company’s stock artificially inflated based on their misstatements.”
A key issue in the complaint is that the company was increasingly relying on providing free memberships in order to “artificially” boost its subscriber figure.
The suit cites an interview that The Wall Street Journal conducted with Oesterle that indicated Angie’s was cutting the subscription cost for new members in New York, Chicago, San Francisco, Washington, D.C., and Indianapolis to $10 from $40.
The market didn’t respond well to the news, with Angie’s shares falling more than 17 percent on Oct. 3.
The stock would fall from $28 earlier in the summer to a low of around $12 this fall. In trading Tuesday morning, shares had dropped 2.5 percent to $14.27.
The company went on to report a third quarter loss of $13.5 million, or 23 cents a share, which was worse than the 20-cents-per-share loss that analysts were led to expect “based on defendants’ bullish” statements, the suit alleges.
Angie’s List spokeswoman Cheryl Reed said Tuesday that the company would have no comment about the lawsuit.
Robbins Geller’s local counsel is Parr Richey Obremskey Frandsen & Patterson LLP.