Rocket Fuel Inc. receives securities class action lawsuit

A law firm recently announced it filed a securities class action suit against a marketing platform provider for alleged breaches of federal securities laws. 

Wolf Haldenstein Freeman Adler & Herz, LLP, explained that the litigation was commenced in the U.S. District Court for the Northern District of California against Rocket Fuel Inc., a company that provides a programmatic media-buying platform that leverages artificial intelligence to garner results. The class action lawsuit was filed on behalf of investors who purchased shares in the company between Sept. 20, 2013, and Aug. 5, 2014. Included are individuals who purchased securities in the company's initial public offering on Sept. 19, 2013, or its secondary public offering on Jan. 30, 2014. 

The complaint states that the company, including certain officers and directors, failed to disclose that a significant number of the advertisements that it brokered were not being viewed by real people, but by automated fraudulent computer programs – something that placed Rocket Fuel's financial performance and operations at risk. The lawsuit claims that the company was unable to identify and eliminate the fraudulent views, cause for customer concerns about the quality of Rocket Fuel's product. The suit alleges that the marketing solutions provider knew its earnings would not meet Wall Street expectations no later than February 2014. 

Individuals who purchased shares in the company during the class period have until Nov. 3, 2014, to be appointed a lead plaintiff in the case. Investors who would like to learn more about the class action lawsuit should contact either Patrick Donovan or Gregory Stone. 

Fraudulent computer programs drained company value
The online advertisement market is beleaguered by computer programs, referred to as bot traffic, that are utilized to spawn further profitable traffic to the websites behind the bots, Law360 explained. The programs act as though they are human viewers. They watch videos, click through webpages and even place items into shopping carts.  

A multitude of securities class action suits against Rocket Fuel have alleged that the company was aware that bot traffic was draining the value of its product, and that revenue would not be as expected, the news source reported. Claims state that insiders, aware of the fraudulent computer program issues, cashed out before the public disclosure that the bot traffic may have placed the company in jeopardy financially and operationally. 

Rocket Fuel allegedly boosted its stock price through misleading claims about the company's performance prior to the revelation last August that Rocket Fuel was unable to surpass its competitors' abilities to block bot traffic, according to Law 360. The disclosure caused stock in the company to drop from $24 to $17 in a single day – following a $175 million cash out by insiders and early investors in Rocket Fuel's SPO.