Synacor, Inc. (SYNC) Accused of Touting Unrealistic Revenue Forecasts
According to the complaint for breaches of fiduciary duty by the company’s officers and directors for alleged violations of the Securities Exchange Act of 1934 between May 4, 2016 and March 15, 2018. On May 4, 2016, Synacor, Inc. (SYNC) announced that it secured a three-year contract to host web and mobile services for AT&T Inc., anticipating contract revenues to be approximately $100 million per year. Based on this revenue, defendants announced a “new three-year goal for the company” with annual revenues of $300 million by 2019.
On August 9, 2017, Synacor revealed that a significant portion of the revenue it was expecting in Q3 and Q4 2017 would be delayed to 2018 and adjusted its Q3 and fiscal year revenue guidance accordingly. On March 15, 2018, Synacor admitted the shortcomings with the AT&T contract, noting that Synacor had only generated about $25 million in revenue during the last three quarters of 2017. Synacor also noted “three material weaknesses in our internal controls over financial reporting.” When news of Synacor’s revenue troubles began to hit the market, Synacor’s stock plummeted over 50% to close at $1.75 per share on March 16, 2018, and has yet to recover.
On August 30, 2018, Syncor announced that AT&T delivered notice of non-renewal to prevent automatic renewal of the AT&T contract.
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