Zebra Technologies Corporation (NASDAQ: ZBRA)
Throughout the class period, Defendants repeatedly made positive statements about its Motorola Enterprise acquisition which, as of December 31, 2015, was responsible for 65% of Zebra’s net sales and 49% of its operating income. Defendants also repeatedly maintained that, even though the Company’s internal controls over financial reporting were not effective because of a material weakness related to the process to prepare and review its quarterly and annual income tax provision, no financial restatements were necessary.
On May 10, 2016, Defendants announced in Zebra’s first quarter 2016 Form 10-Q that as of April 2, 2016, the Company’s internal controls over financial reporting were not effective but no financial restatements were necessary. This news drove the price of Zebra shares down over $11, or approximately 18%, to close at $51.46 per share that day.
In truth, however, on November 1, 2016, Defendants admitted in Zebra’s Form 8-K that restatements were required to “correct the financial statements for known errors, including those that were previously disclosed in filings with the Securities and Exchange Commission (“SEC”) as immaterial” and would correct improper accounting for income taxes, its sales commission plan, and the net realizable value of trade receivables acquired in connection with the company’s acquisition of the Enterprise business of Motorola Solutions, Inc.
“The Defendants’ apparent admission they knew Zebra’s accounting was improper does not square with their positive statements about the Enterprise acquisition and repeated refusal to correct the Company’s financial statements,” said Hagens Berman partner Reed Kathrein. “As a result, Zebra investors have been significantly harmed.”
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