The Outlook Wasn’t So Rosy, Investors Say

MANHATTAN (CN) - Millennial Media lost 86 percent of the $310 million it made since its 2012 initial public offering, shareholders claim in a federal class action.

The digital-advertising company allegedly focuses on the mobile-computing segment, serving smartphones that run Apple and Google operating systems.

Shareholders claim that the company touted its data platform Mydas as an easy solution for developers to integrate Millennial Media advertising into their mobile applications.

Because Millennial Media overstated its future's growth and potential success, however, "rushed, slipshod programming, poor performance and failure" led stock prices to bottom out earlier this year at a level 86.56 percent lower than the high achieved since Millennial's 2012 IPO, according to the complaint filed Tuesday by lead plaintiff Public Employees' Retirement System of Mississippi claims.

Millennial Media has not returned a request for comment.

According to the complaint, Millennial Media sold more than 11.7 million shares at $13 per share in its March 2012 IPO, realizing proceeds of $152 million. In the second offering on Oct. 24, 2012, Millennial allegedly sold 11.5 million shares at $14.15 to realize proceeds of $162 million.

But the company announced fourth-quarter revenue for 2012 at $58 million, "sharply below analysts' expectations" of $62.9 million, according to the complaint.

In its guidance for 2013, the company announced its plans to acquire Metaresolver Inc.

Shareholders blame the "poor results [and] weak guidance" on "ongoing problems with the company's then-existing technologies, such as the Mydas platform's inability to provide accurate and reliable records of end-users' clicks and actions, which were driving clients away."

The news caused stock prices to drop to 45.38 per share, down 37.54 percent, on Feb. 20, 2013, according to the complaint.

When Millennial announced that August that it would acquire Jumptap in an all-stock deal, it valued Jumptap at more than $200 million.

Noting that Jumptap featured "technology centering around programmatic advertising for performance-based advertising - services that the company claimed its Myads platform already provided," the shareholders say Millennial's "ongoing problems with its technologies" drove its need to acquire Jumptap.

At the close of market Feb. 19, 2014, the company revealed "disappointing revenue guidance" for the first quarter of 2014, according to the complaint, which notes that the $76 million figure was "far below" expectations of $83 million.

Millennial also said at that time that it could not meet earlier growth projections, let alone match the growth rate of other firms in the industry, shareholders say.

As a result, stock prices allegedly fell 14.58 percent.

This past May 7, the company again showed dim projections and "dour revenue guidance" of up to $75 million for the coming quarter, again below projections of $96.4 million.

Stock prices dropped once again the next day by 37.2 percent at 43.36 per share.

Shareholders position the blame on the "defendants' materially false and/or misleading statements and omissions."

A dozen individuals are named as defendants alongside Millennial Media Inc., including company President and CEO Paul Palmieri, and Vice President and CFO Michael Avon.

Also named are principal shareholders Bessemer Venture Partners; Columbia Capital; Charles River Ventures; and New Enterprise Associates Inc..

Underwriters Morgan Stanley & Co.; Goldman, Sachs & Co.; Barclays Capital Inc.; Allen & Co. LLC; Stifel, Nicolaus & Co. Inc.; Canaccord Genuity Inc.; and Oppenheimer & Co. Inc. also were sued.

The lawsuit seeks damages for securities violations.

Christopher Keller with Labaton Sucharow represents the class.

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