Cohen Milstein Sellers & Toll PLLC is conducting an investigation to determine whether ZAGG Incorporated (“ZAGG” or the “Company”) and certain of its officers and directors made false and misleading statements and/or omissions in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
Class action lawsuits were filed in the U.S. District Court for the District of Utah by other law firms on behalf of purchasers of the common stock of ZAGG Incorporated (NASDAQ: ZAGG) between February 28, 2012 and August 17, 2012, inclusive (the “Class Period”).
The complaint alleges that ZAGG and certain of its officers and directors (“Defendants”) misrepresented and/or failed to disclose that: (1) Robert G. Pedersen, former Chairman and CEO of ZAGG, had placed more than 50% of his ZAGG stock as collateral on margin; (2) as a result of Pedersen's reckless actions, ZAGG began a secret succession plan to replace him in December 2011; and (3) as a result of the foregoing, ZAGG’s financial statements were materially false and misleading at all relevant times. On December 21, 2011, defendant Pedersen sold 345,200 shares of his ZAGG stock for approximately $2.6 million. The Form 4 for the sale stated that Pedersen had sold the shares to "
meet an immediate financial obligation
." On August 17, 2012, ZAGG announced that Pedersen had “
stepped down as CEO and Chairman
.” The Company did not initially disclose the reason for Pedersen’s abrupt departure. However, on the same day, Pedersen filed a Form 4 reporting that he had sold 515,000 shares of ZAGG stock on August 14 for approximately $4.2 million and disclosing that the shares “
were sold to meet margin calls
” on Pedersen’s account.
On the last day of the Class Period, August 20, ZAGG filed an 8-K in which it stated that its board had “
accepted the resignation of Pedersen
” on August 17. Although the Company did not explicitly disclose the reason for Pedersen’s resignation, the 8-K included a general discussion of the Company’s policy prohibiting holders of at least 10% of ZAGG stock from engaging in speculative transactions involving ZAGG stock, such as holding those securities in a margin account. The price of ZAGG shares fell from $8.42 to $7.30 on August 20, representing a decline of approximately 13%.
During a conference call with analysts on August 28, ZAGG finally confirmed that Pedersen’s resignation was in fact related to his sales of ZAGG stock to meet margin calls both in December 2011 and August 2012.