Verisign (VRSN) securities fraud summary
On October 25, 2012, VeriSign shocked investors by releasing below expected revenues and earnings for the third quarter 2012. VeriSign also warned investors for the first time that Department of Justice was reviewing its domain name pricing arrangements and that it was doubtful that the review would be completed in time to allow the Commerce Department to renew its contract before it expired on November 30, 2012. Based in part on this news, VRSN shareholders lost $1.825 billion in a week.
This securities fraud class action lawsuit then asks the reoccurring question of whether VeriSign knew in advance that its numbers would be weak and whether VeriSign purposely mislead investors until October 25, 2012.
VeriSign lawsuit facts
Anybody that operates or owns a web site knows VeriSign. VeriSign via a contract with the US government operates the .com and .net registries. As of June 30, 2012 total combined .com and .net domain registrations totaled 118.5 million domains, of which 103.7 million were in .com and 14.8 million in .net. VeriSign has a virtual monopoly on domain registry and the deal it has with the US government has come under intense criticism from industry observers. The VeriSign contract with the US government was up for renewal on November 30, 2012.
2012 was also a watershed year for the domain registry industry because Google applied two algorithms to its search engine to curb common optimization tricks to get sub-par domains to rank higher on google search results. (We have all seen these in the past.) These algorithms while great for Google users, crippled the market for sub-par web sites, leading to many operators simply closing shop and abandoning the domain name altogether.
2012 also saw the near collapse of VeriSign’s ability to earn advertising revenues from “parked” web sites. Many times domains are purchased but not used, i.e. “parked”. VeriSign could place ads on these parked sites and generate revenue from those ads. That business dropped significantly in 2012
Loss to VeriSign shareholders
Verisgn traded at a high of $49 in October, 2012. VeriSign’s stock fell precipitously from its October 25, 2012 closing price of $46.60 per share to close below $40 per share on October 26, 2012, falling $7.21 per share, or 15.47%, on extremely high volume.
Versign (VRSN) securities fraud class action investigation
The VeriSign securities fraud investigation asks the following questions:
Was VeriSign aware that the US government was under pressure to renegotiate the price points with VeriSign for its operation of the .com and .net registries and if so was this fact properly and timely communicated to VRSN shareholders?
Was VeriSign aware of the impact of Google’s algorithm changes to the domain registry business earlier than OCtober 25, 2012 and did VeriSign properly and timely communicate the negative impact to VRSN shareholders?
Did VeriSign downplay the revenue it received from advertising on parked domain names. which could have impacted the weak third quarte 2012 revenue numbers
If you lost money as a VeriSign shareholder, please complete the web form on this page for a free legal review.