Shareholders steamed over 'Shrek 2' sales
Jeffrey Katzenberg may be headed back to court.
The DreamWorks Animation CEO is the target of a new class-action lawsuit over the toon studio’s failure to meet estimated DVD sales for “Shrek 2” last quarter.
Company is also named as a defendant, along with chairman Roger Enrico.
Complaint, filed in U.S. District Court in Los Angeles, alleges that DreamWorks and its top execs knew, or should have known, that “Shrek 2” DVD sales were falling below projections in the first quarter and that they failed to inform investors, instead keeping up guidance that they knew they couldn’t meet.
When company did disclose in early May that it had booked no revenue for “Shrek 2” homevid sales in the first quarter due to higher-than-expected returns, its stock fell more than 12%. Follow-up reports about investor concern over execs’ failure to disclose sales figures earlier, along with what some on Wall Street considered a disappointing opening for “Madagascar,” led its shares to take another 9% hit Tuesday.
“We believe the suit is completely without merit, and we intend to defend ourselves vigorously,” said DreamWorks Animation corporate communications topper Bob Feldman.
Suits like the one filed Thursday are typical after a stock suffers a sudden and unexpected decline.
Many are little more than a law firm’s attempt to recruit a group of plaintiffs in the hope of getting a settlement out of a company that wants to avoid the negative publicity of a trial. Some class-action suits end up raising serious questions and putting hundreds of millions of dollars at stake, though, such as the suit by Disney shareholders over the firing of Michael Ovitz.
Katzenberg himself is a veteran of corporate legal wrangling, having engaged in a high-profile $250 million suit against Disney after he ankled in 1994.
DreamWorks Animation stock closed down 1% at $29.75 Thursday.