uDraw Disaster Leads to Lawsuit

[Andy Chalk]

uDraw Disaster Leads to Lawsuit

THQ has been slapped with a class action lawsuit for misleading shareholders about the prospects of the disastrous uDraw.

Things continue to go from bad to worse (to even worse) for THQ. Less than a week after the announcement of an investigation [http://www.escapistmagazine.com/news/view/117895-uDraw-Debacle-Spurs-Investigation-Into-THQ] into allegations that the company misled investors about the likely fate of the uDraw GameTablet, the company has been hit with a class action lawsuit claiming that it "failed to disclose adverse facts" about the product from the period of May 3, 2011, to February 3, 2012.

In simple terms, the lawsuit alleges that THQ knew the uDraw tablet was a huge bust but kept that knowledge on the down-low and continued to promote it as a big part of the company's future. It wasn't until THQ's third-quarter financials came out that the company admitted that sales were "WWE '12 [http://www.escapistmagazine.com/news/view/114619-THQ-Sales-Are-Even-Worse-Than-Feared] had been gobbled up by "high inventory reserves, price protection, and concessions at retail" - which is to say, massive price cuts to try to get them off the shelves.

In the wake of that debacle, THQ's already-low share price crashed to around the 50 cent mark, where it languishes today. The company is now trying to get that price up to over $1 in order to avoid a Nasdaq reverse stock split [http://www.escapistmagazine.com/news/view/115591-THQ-Faces-NASDAQ-Delisting]," which will reduce the actual number of shares in the company but, hopefully, increase their individual vale.

Because it "recklessly disregarded" the knowledge that uDraw would be a spectacular failure, according to the lawsuit, THQ "lacked a reasonable basis for their positive statements about the Company and its prospects." The lawsuit, filed by shareholder rights firm Robbins Umeda LLP, seeks damages on behalf of everyone who purchased common stock in THQ during the period under investigation.

Source: GamesIndustry [http://www.gamesindustry.biz/articles/2012-06-19-thq-hit-with-class-action-suit-over-alleged-udraw-sales-misrepresentation]


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[gigastar]

Ok, time to stop hoping that things get better, time to start voodoo on the guy(s) who thought the uDraw was a good idea.

 

[shintakie10]

THQ has turned failure into an art form.

Sad to say, that one wasn't very good.

I know THQ was basically done for at this point anyway, but if this goes through and they lose THQ will be 100% done for.

 

[Baresark]

THQ has turned failure into an art form.

That is a bit malicious.

OT: I have been hoping beyond hope they pull out, but it's looking kind of grim at this point. I hope they make it, I want to continue getting some of their great games.

On the other hand, they only recently seemed very optimistic. So, I'll hold out hope. This doesn't seriously mean anything at this point and I think people have blown this a little out of proportion. They were being investigated, and now there is a class action lawsuit. It could seriously be years till this is resolved. In that time THQ may pull out. We'll know as soon as we see how the reverse split turns out. Also, it's not "if" the reverse split will raise the prices of the the stock, it WILL raise the prices of the stock. But it needs to be above $1 for a set amount of time to avoid delisting. Time will tell.