Faruqi & Faruqi, LLP’s national practice focuses on complex civil litigation. The firm practices in the areas of Securities, Merger & Transactional, Shareholder Derivative, Antitrust, Consumer Class Action, and Wage & Hour litigation.
The lawsuit focuses on whether the Company and its executives violated federal securities laws by failing to disclose material information in the Company’s Registration Statement and Prospectus (the “Offering Documents”) filed in connection with the IPO. Specifically, it is alleged that Ooma’s Registration Statement concealed: (i) that certain exceptionally large prior fiscal year sales to its largest outside reseller, emphasized in the Offering Documents to be a very significant Ooma partner, were not recurring or being replaced in the fiscal year leading into the IPO; (ii) Ooma’s customer churn rate, emphasized repeatedly throughout the Offering Documents as being at an industry low rate of 0.55%, had increased significantly as of the IPO as a result of customers having endured eight-hour service outages in April and May 2015; (iii) technological difficulties in the Company’s lead generation business were causing leads to get lost in the internet before reaching their intended targets, negatively impacting sales of that service and Ooma’s business; (iv) Ooma’s subscription revenue growth and operating and pretax profit margins were both decreasing; and (v) Ooma’s subscription retention rate was dropping and net losses were doubling on a year-over-year basis, as of the IPO.
As of the time of the filing of the complaint, the share price fell $6.44 per share from the $13 IPO to close at $6.56 per share, a 49.5% drop, on January 14, 2016.