Risk & Compliance

Unreality TV? Comcast Accused of False Statements

Investors claim the cable company wasn't forthcoming about its increased competition and upgrading costs.
Stephen TaubJanuary 4, 2008

A class-action lawsuit accuses Comcast Corp. of making misleading statements to investors over its growth prospects.

Coughlin Stoia Geller Rudman & Robbins LLP, the law firm representing the plaintiffs, says the suit was filed on behalf of investors who owned the cable giant’s stock between February 1 and December 4, 2007.

The complaint alleges that Comcast inflated the price of its stock by issuing false and misleading statements. The suit also faults the company for failing to tell investors that it was facing increased competition from satellite providers and telephone companies, which meant Comcast was spending more money to attract and retain customers without its investors’ knowledge.

In addition, the suit asserts that the company’s level of capital expenditures for upgrading and maintaining its technology and equipment was rising beyond internal expectations. As a result, positive statements about the company and earnings guidance “were lacking in a reasonable basis at all times,” according to the law firm.

In addition to Coughlin, law firms Spector, Roseman & Kodroff PC and Schatz Nobel Izard PC have filed similar suits against Comcast in the U.S. District Court for the Eastern District of Pennsylvania. According to a Comcast spokesman, “the suits have no merit, and we will defend ourselves vigorously.”

When the company did come forward with lower estimates of its growth potential, its stock price fell, the law firm notes. In a press release issued October 25, Comcast reported that third-quarter net income fell 54 percent from the prior year and that it was experiencing a slowdown in new subscribers. Soon after, the price of its stock fell $2.57, or about 11 percent, to close at $21.28 per share on heavy trading volume.

Then, on December 4, Comcast issued another press release to announce it had downgraded its 2007 user growth forecast of 6.5 million revenue generating units to 6 million RGUs, and that its revenue and cash-flow growth projections would fall short of expectations. On this news, the price of the company’s stock fell another 12 percent, to close at $18.18 per share on heavy trading volume.

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