A Pennsylvania law firm slapped Virgin Mobile USA Inc. with a lawsuit claiming the operator misrepresented financial information in advance of its October initial public offering.
The class action suit, which was filed by the Law Offices of Howard G. Smith, claim that Virgin Mobile suffered “an enlarged financial loss” in the third quarter of 2007 as expenses ramped up and subscriber growth slowed.
The mobile virtual network operator (MVNO) revealed the information in a quarterly report on Nov. 15, according to the suit — more than one month after the IPO. Shares of Virgin Mobile, which sold for $15 each during the IPO, lost more than 10% immediately following the quarterly report and continued to decline, the complaint alleges.
A Virgin Mobile representative described the claims as “completely without merit,” and said the company will “defend the suit vigorously.”
The suit was filed in the Southern District of New York on behalf of investors who purchased stock between the IPO on Oct. 11 and the Nov. 15, when the financial report was released.
Shares of Virgin Mobile lost $1.73, or 20%, closing at $7.06 Thursday following news of the suit. The stock traded at $6.75 per share early Friday afternoon.
Virgin Mobile USA faces suit over financial disclosures
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