DALLAS (CN) - The directors of Heelys Inc. artificially inflated stock value by hiding the staggering number of serious injuries suffered by people who used the company's wheeled shoes, shareholders claim in Federal Court.
Heelys shoes allow a user to switch from walking or running to skating without the use of safety equipment. In 2006 Heelys launched an advertising campaign that greatly boosted sales by having the footwear featured on television networks such as CNN and CNBC and in magazines such as Time and People.
Shareholders claim Heelys' directors filed false statements with the Securities and Exchange Commission that failed to disclose the product's serious safety concerns, including reports of broken bones and fractured skulls. Injury reports increased dramatically in the months leading to Heelys initial public offering, plaintiffs claim, but Heelys made no mention of the potential liability.
When the safety hazard was finally disclosed, Heelys' value plummeted from more than $32 a share to less than $8 a share - "wiping out more than $648 million worth of market capitalization," the complaint says. See complaint.
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