CASES
DJSP Enterprises, Inc.
Class Period: Feb 16, 2010 to Nov 15, 2010
Lead Plaintiff Deadline: Sep 20, 2010 + Deadline passed
Summary of Case:
A securities class action has been filed against DJSP Enterprises, Inc. (DLSP) ("DJSP" or the "Company") on behalf of all securities purchasers from March 16, 2010 through May 27, 2010, inclusive ("Class Period"), in the United States District Court for the Southern District of Florida.
The complaint alleges that DJSP is one of the largest providers of processing services for the mortgage and real estate industries in Florida and the United States. Through its three operating subsidiaries, the Company provides non-legal services that are ancillary to and support the residential real estate foreclosure market, other related legal actions and lender owned real estate services. These services are provided almost exclusively to the Law Offices of David J. Stern ("DJS"), which provides residential foreclosure work for approximately 12 loan servicing firms. DJS's clients include all of the top 10 and 17 of the top 20 mortgage servicers in the US. Consequently, DJSP provides its services to these same mortgage servicers through an agreement between DJSP and DJS.
DJS is a law firm founded and solely owned by David J. Stern ("Stern"), who is also the President and Chief Executive Officer ("CEO") of DJSP. According to the Company's Form 20-F filed with the Securities and Exchange Commission ("SEC") on April 2, 2010, DJS is the Company's primary client and any change in the volume of foreclosures referred to DJS by its clients would necessarily and materially affect the financial performance of DJSP.
On March 16, 2010, DJSP filed a 6-K with the SEC in which it touted the quarterly results it announced on March 11, 2010, reaffirmed its previously-announced guidance, and also indicated that no matter what the Obama Administration does to slow down foreclosures, they have found the "way to create a profit center on it...."
In April 2010 one of DJS' largest clients began a foreclosure system conversion that resulted in a substantial decrease in the volume of foreclosures referred to DJS for April and May 2010. This was significant because DJSP relied heavily on the providing of ancillary services to DJS to generate its revenue. Despite knowing that DJSP generates a significant amount of its revenue from flat fees earned within the first month of a referral and that any significant decrease in referrals would materially and adversely affect its revenues, DJSP did not publicly disclose the substantial slowdown in foreclosure referrals or the slowdown due to governmental intervention programs until May 27, 2010.
The adjusted closing price for DJSP shares on May 27, 2010 was $8.87 per share on a volume of 412,500 shares trading. Trading of DJSP shares opened on May 28, 2010 at $6.33 per share and closed at an adjusted price of $6.38 per share on a volume of 4,931,300, representing a drop of nearly 29%. As of April 2, 2010, the Company had 9,166,666 shares outstanding; thus approximately 54% of the Company's outstanding shares were traded following the revelation on May 27, 2010 that there would be a substantial decrease in the number of residential foreclosure cases to DJS and subsequently to DJSP.
If you purchased this company's shares during the Class Period and suffered a loss or for further information about the case, please review the links below.