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Synacor Overestimates Contract Revenues for 2017 Securities Class Action

Synacor Office

News of Synacor’s signing of a three-year contract with AT&T, the largest pay TV provider in the US, seemed promising for the company when it was announced in 2016. But the complaint for this class action claims that Synacor did not disclose that the large revenues projected to come from the contract would not show up until 2018, long after the announcement was made. The complaint for this class action alleges that the company misled investors into thinking that they would come much sooner, in violation of the Securities Exchange Act of 1934.

The class for this action is all persons who acquired Synacor securities between May 4, 2016 and March 15, 2018 who were damaged thereby.

Synacor, formerly known as CKMP, is a technology development, multiplatform “monetization partner” for video, Internet, and communications providers.

On May 4, 2016, at the beginning of the class period, Synacor announced that it had obtained a three-year contract to provide portal services for AT&T, Inc. The complaint quotes the press release as expecting revenues of about “$100M per year, after full product deployment in 2017.” However, the complaint claims that the revenues during 2017 were not to be nearly that large.

The company had issued guidance of $160 million to $170 million in revenues for 2017. However, on August 9, 2017, the company claimed that its “joint AT&T-Synacor team has made the strategic decision to prioritize portal engagement right now over monetization.” As a result, it said, “a significant portion of the revenue that we were expecting in Q3 and Q4 this year is delayed to 2018 and we are adjusting our financial guidance for 2017 accordingly.”

For the third quarter, it provided guidance of $35 million to $40 million and for 2017, it lowered guidance to $140 million to $150 million. At this news, the company’s stock price fell by over 32%.

However, on March 15, 2018, on a conference call to discuss fourth-quarter earnings, the company admitted that “in the last three quarters of 2017, we generated approximately $25 million in revenue from AT&T. We are expecting that AT&T will continue to focus on consumer experience…” It added, “Clearly, this forecast is below the $100 million annual revenue target that AT&T and Syncor announced when we first discussed the portal contract…”

At this news, the company’s stock price fell by more than 14%.

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