The mobile advertising platform Sito Mobile, which targets ads at users based on their location, is facing a securities class action lawsuit because it allegedly failed to hit revenue goals due in part to the U.S. presidential election. To learn more about this case, visit Battea’s Sito Mobile case summary.
Specifically, the class action lawsuit – filed against Sito and certain of its executives – alleges that the company could not increase its fourth-quarter revenues or revenue growth to the point it originally projected, due in part to the fact that its business was more heavily dependent upon the election than it initially revealed. Because the defendants did not reveal these issues, the suit alleges that any statements made about its business, operations or prospects were materially false or misleading.
The suit has a class period from Feb. 9, 2016, to Jan. 2, 2017, and was filed in the U.S. District Court for New Jersey.
What’s the issue?
Sito announced its preliminary fourth-quarter results on Jan. 3, 2017, revealing revenue of between $7.3 million and $7.6 million, but noted that the numbers were down due to advertising spending being hurt by the significant focus placed on the presidential election overall.
“We are disappointed that Q4 ad revenue fell below our expectations after a very good year overall,” said Sito Mobile CEO Jerry Hug. “We clearly underestimated the effects of this year’s election on our clients’ campaign spending. Leading into the quarter, we saw seemingly normal activity levels and then revenue dropped off dramatically during the election window.”
Hug further noted that in the immediate wake of the election business returned to something resembling normalcy, with the company both adding new clients and retaining old ones, the company said. Furthermore, Sito continues to work toward new deals that, if successful, would potentially reduce the company’s fluctuations in revenue from one quarter to the next. Sito’s full financial results for both the fourth quarter and entire year of 2016 will be released on March 28.
How did the stock price move?
At the time the class period began, Sito’s stock was trading at about $2.50 per share. The highest point for Sito Mobile’s stock over the course of 2016 came in mid-October, when it climbed as high as $5.60 per share. By the time the presidential election rolled around in early November, it had fallen somewhat but still closed election day at $4.73 per share, then climbed even higher in the wake of the decision, hitting $5.34 on Nov. 14 (the stock’s third-highest point of the year). However, the price began slipping shortly after that, falling to as low as $2.98 in mid-December before rising again toward the end of the year, closing 2016 at $3.69.
However, immediately after the start of the new year, the company’s stock price tumbled precipitously, falling to just $2.50 per share and sinking lower ever since. Today it trades at $2.42.