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Red Hat Vs. The Lawyers
ajs writes "On July 13, Red Hat announced that they would be re-stating their revenues for the last 3 years. This sent a shock-wave through their stock price, but early analysis seems to indicate that it's not that big a deal (the end-result is the same for a given contract, but it will be counted toward a different month). But then the really bad news hit. [Opportunistic lawyers] are taking this opportunity to punish Red Hat for reporting the change and the resulting drop in price. Red Hat is doing well, but can they weather major class action law suits without harming the business? How have other technology companies dealt with this sort of suit?"
It's no wonder some companies cook their books. Sometimes you're damned if you do and damned if you don't.
I'd really hate to see Red Hat take a huge hit from something stupid like this.
This is freaken sad. SCO has not been investigated by the SEC by Redhat was? My tax dollars at work.
...it's going to hurt.
The longer you go, the worse it's going to be. The best thing is to deal with it as soon as possible and get it behind you. If you wait, it makes it look like you're hiding something or biding your time.
Isn't it just grand how thousands of very intelligent geeks spent countless hours creating and improving Linux and Red Hat, and now a bunch of doughy, pasty-faced vultures at "Goodkind Labaton Rudoff & Sucharow LLP" will rake in an assload of cash from this?
God, I really hate the American legal system.
RedHat was following the rules (particularly the ones about switching auditors), and their new auditors convinced them to use a slightly different accounting method for their subscription accounting. It looks as if their previous accounting method was not neccesarily incorrect, flawed, or false - just different.
How is it that someone can bring a class action lawsuit against a company for changing their accounting practices from one one allowed method to another allowed method?
"Great men are not always wise: neither do the aged understand judgement." Job 32:9
The worst part about this bullshit is that they refused to run this story until they could dole it up with enough flamebait to point the finger at someone other than RedHat.
Look into the company that owns this site, VA Linux, and the scumballs who took it public.
Actually thats what a lot of the dot commers were doing (and got in trouble with the SEC for it). Microsoft held back signifigant portions of their Windows 2000/Office 2000 era earnings in a "cookie jar" that was supposed to level out revenue after the dot com bubble burst. Not every .com was part of a pump-and-dump scam, some had intentions of riding out the crash.
09f911029d74e35bd84156c5635688c0
I patently reject your characterization of me as an "ambulance chaser." I am one of the many investors who lost significant amounts of money in redhat stock,
.com bubble bursting, not a trivial restatement of earnings. The only thing you can claim to have lost as a result of this is today's change in price.
Waah. I bought in on the day it opened at about 50, got out of half of it at 300 (pre-split), and kept the rest. The paper losses are a result of the
But, by all means, please do sell while it's undervalued, I'll be buying up your shares. Any lawsuit here is strictly driven by greed, either yours for not knowing when to get out (welcome to the stock market, it's gambling, deal with it), or (ahem) somene else's greed in trying to hurt the competition.
Keep seeing at your investments as a crusade and you will lose your shirt.
I'll take two lawyers over an MBA any day of the week, especially when the MBA in question had middling grades, couldn't get into school without daddy's help, and couldn't run a profitable business to save his life.
fuck you.
Class-action suits against a company for mickey-mouse bullshit is repulsive. If the company was actually doing something sleezily financially bad (eg enron) or dumping arsenic in the public water supply, then these class-action suits are deserved. But suits merely because of stock-price slippage are pathetic. I bet you wouldn't give 2 shits if the same tactics you decry redhat of have earned you money. But since you lost, you can't blame yourself, you're too smart to have made a bad decision. Yeah, blame redhat.
It's asshats like yourself that have destroyed the society and culture that used to exist in the West. Now companies first priorities are their investors, not their customers nor their product. It's pathetic, and that's exactly the reason why all prime-time TV is the same and sucks, why restaurant chains and consumer food companies use shoddy unhealthy (but cheap) ingredients (eg high-fructose corn syrup and MSG), etc. Because the companies have to look after your ass because you invest in them.
I think if you invest in a company, you should that company and have to bide by it's decisions. If those decisions make the stock go down (as long as it's ethical) than tough shit. Now the lawyer in you is probably defining 'ethical' to mean whatever takes care of investors the most. If you are thinking that, then you REALLY are a lifeless asshat that is destroying our society.
Take a look at the dates on the announcements... less than a day from the RedHat announcement of their changes to the announcement of the class-action lawsuit. Hardly enough time for a law firm to investigate and decide if the case really has any merit, I would think.
Even if the case has merit, that doesn't change the fact that the filing of the class action suit happened incredibly quickly... so quicly, in fact, that there's a reasonable question as to whether it was filed because they firm thought they would have a strong case, or if it was filed because the firm though there was a possibility that they might have a strong case.
Kevin Thompson brings a unique blend of operational and financial knowledge from his experience with high-growth and multinational companies. He formerly served as a partner in the Global Technology Industry Group of PricewaterhouseCoopers LLP, where he directed stock offerings and oversaw mergers and acquisitions at public and private technology companies.
Prior to his position at PricewaterhouseCoopers, Thompson served as a senior manager for Arthur Andersen LLP for 10 years, overseeing public offerings and directing projects for companies in North America, Latin American and Southeast Asia. He is a Certified Public Accountant and holds a bachelor of science degree in business administration with highest honors from the University of Oklahoma.
I am the maverick of Slashdot
How the hell are these people "ambulance chasers"? There's no ambulance here, just the kind of shady accounting that we all decry when it's Ken Lay or the guy from worldcom.
And I love how the poster tries to make it seem like the lawyers are trying to sue because of the announcement rather then the act they were announcing (i.e. that they cooked their books)
Poster needs to get a clue. Maybe red hat did just make 'a mistake' but they're still liable for it.
autopr0n is like, down and stuff.
No offence but RHAT has not been a good buy for a long time, if ever. Not because there business model is bad, but because they have been *overpriced*.
If I bought Red HAt at any time over the past few years, based on my experience with investing and especially open-source (I make a living with open source myself) I would *expect* to lose money.
So if you lost a lot of money, don't complain too much, because some of us expected RHAT would experience it's "correction" even without this minor earnings restatement.
Yeah Red Hat should be held accountable, but it's just like the employees who put 100% of their holdings in Enron company stock. That's a dumb move even *without* the fraud.
Wow, where was your name mentioned in the article? Seems you're taking something personal that was in no way directed at you. Unless you're a lawyer, you can't be an ambulance chaser.
"Give a man fire, and he'll be warm for a day; set a man on fire, and he'll be warm for the rest of his life
The particular law firm is a new one on me, usually these are done by that scumbag Bill Lerach in San Diego.
"Strike suits" are a basic fact of life for public tech companies. In fact, it kind of proves RH is growing up.
The idea is that any sudden movement of a company's stock, in either direction, is actionable because the company presumptively withheld information that impaired the public's opportunity to either profit or avoid losses. Eventually the lawyers quietly get paid huge $$$ to go bother someone else.
It's just ridiculous that judges even let this garbage into their dockets. Welcome to America.
Uh, the article _I_ read said it was still vastly overpriced - it's just that this downturn was not really based on any fundamentals. Red Hat is still making money selling support, and financial rewrites don't change that.
Ask anybody in my LUG - I'm the biggest Red Hat supporter in the world. But that _does not_ mean their stock is worth buying.
-Erwos
Plausible conjecture should not be misrepresented as proof positive.
Redhat's P/E is an amzing 125.
autopr0n is like, down and stuff.
If you were stupid enough to sell for less than what you purchased the stock for, that's your own problem.
This is insightful? Give me a friggin break moderators. Have you ever invested in the stock market before? If you buy the stock and the price starts to go down, you have a choice -- if you think it's going to go down more, you can limit your losses and sell. If you think it's going to go back up, you ride out the bad times. Sometimes you make the right choice. Sometimes you make the wrong choice. Calling someone stupid for selling a stock for less than what they bought it for is ridiculous. What's stupid is holding onto that stock, when all indications are that it will never rise again, just because you don't want to sell at a loss. And from looking at RedHat's stock profile since its IPO, it looks a bit unlikely that RedHat will ever again achieve the highs it once hit.
... you can sue anybody for anything. It doesn't mean you'll win."
I like to repeat that saying to myself when reading about lawsuit X, which I heard from a very successful personal injury law firm leader.
IANAL, but it seems to me that this public admission of change from one acceptable accounting practice to another should help things blow over; we'll likely see this case dismissed.
It also strikes me as odd that they'd put out a press release about their shiny new lawsuit without a plaintiff.
Earnings statements are done within the US tax code. There is no one on the face of this earth that knows everything in that abortion. It's huge, with a hundred years of crap that never got deleted, and it changes every single year. It is impossible for the IRS to keep up with all of it, why should anyone be surprised if a mistake is made?
It's time to junk the whole thing and go far a flat rate with no loopholes, for individuals and businesses. It would end the cottage industry of lobbyists, lawyers and accountants that make a fortune translating, modifying, and manipulating the mess.
Professional Politicians are not the solution, they ARE the problem.
My advice: grow up.
Sometimes you lose money on a stock. Sometimes you make money on a stock. That's true for everyone.
But everyone doesn't go crying to a lawyer every time they have a problem. Only a certain kind of person does that -- not the good kind.
I suggest if you really want your money back, you should just go rob a liquor store. As you point the gun at him, you could explain to the clerk that you're doing it because you're a victim of a small disagreement in corporate accounting methods.
Or you could earn it, like -- well, like a grown-up.
Just because people here think that Red Hat is a good company doesn't mean that Red Hat is held to a lower standard. An earnings restatement is an earnings restatement. If they did wrong they should suffer the paint that other "restaters" have felt. Subscription accounting models are very difficult to account for and have caused problems for many in the past.
Get over it.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
ambulance chaser
n. Slang
1. A lawyer who obtains clients by persuading accident victims to sue for damages.
Does a class action civil lawsuit equal a "lawyer who obtains clients by persuading accident victims to sue for damages?"
Good point. However, remember that "service" in this case is more than a helpdesk ticket. Service is also software. Software-as-service takes on two forms.
The first software service is packaging. All of Redhat's software is Open Source. One can download, build, and configure the exact same system that is bundled as any of the official RedHat platforms. However, Redhat does this for their customers with official RPMs.
Of course, this service isn't unique. Even if you don't want to package your own RPMs, there are others who will - collected in to public repositories. So why is Redhat's service unique?
Redhat offers a slow-moving target for enterprise developers. If you're dependant on enterprise applications (say, Oracle) you're going to want to run on a platform Oracle has agreed to support. Redhat does the testing and negotionation with enterprise developers to create that platform. Redhat's RPMs are a part of this.
Some techies will find this all a bit dubious. But then, the concept of "someone to support it / blame" is seen as dubious - and it's often cited as a real issue with Business IT.
When you sue a company, you are effectively sueing the people who own that company. While the stockholders are not directly liable, any money you get comes directly from their dividend. So, if you still own stock, you are filing a lawsuit against yourself. If you sold your stock, you are sueing the poor fools you sold the stock to for acts committed by the company when you owned it.
I'm all for holding companies accountable for their actions, but I fail to see how lawsuits like this do anything other than benefit prior stockholders at the expense of the current ones.
that the stock price dropped not because of the SEC filing, but primarily because of the lawsuit brought against them AFTERWARDS.
THIS THING CAN TURN ON A DIME, MACROSSZERO STYLE ALSO FUCK BETA, ~NYORON
I'm not sure why they're sueing Red Hat since the plaintiffs are the stock holders of Red Hat and the defendant is Red Hat which is owned by the stock holders. The only one who's going to profit from this are the lawyers.
EvilCON - Made Famous by
How exactly is this suit supposed to "help" the shareholders? Isn't the company OWNED by the shareholders? The lawyers are essentially suing the shareholders, then, right? Sounds like the lawyers are just looking to fatten their wallets.
Perhaps, but that's nothing compared to what you lose if you suport things you know to be wrong just because you hope to thereby get money.
-- MarkusQ
This kind of biased editorializing that has been pointed in the past but why not point it out again: I don't remember the anti-MS California class action attorneys being labeled "ambulance chasers." What bothers me more though is just any old lawyer being called an ambulance chaser. Sharks, maybe. Ambulance-chasers, no. It reminds me of when people call liberals "terrorists" because they are anti-war. I don't care if you think they are bad because they are anti-war, but don't use some irrelevant word. Same thing goes here. Ambulance chasers are laywers that solicit clients soon after personal injury. Anyway, it doesn't look like the class has been certified. It could be this case goes nowhere and it doesn't even cost RH that much (relatively). (Don't mod me troll because I mentioned lawyers, liberals, and M$ in the same post :P)
And both a market shall make
I think if you go, for example, to finance.yahoo.com and poke around, you'll find that pretty much any time a publicly traded company restates earnings, class-action suits follow. They usually also fade away without much fanfare.