Class Action Suit Filed Against Oakley, Inc., its Officers and Directors and its Underwriters Alleging Misrepresentations and Insider Trading

Business Wire, Dec 26, 1996

SAN DIEGO--(BUSINESS WIRE)--Dec. 26, 1996--A class action has been commenced in the California Superior Court for Orange County by plaintiffs Eric Sher, Harold Baron and Daniel O. Eckert on behalf of purchasers of Oakley, Inc. ("Oakley") common stock during the period March 22, 1996 to December 5, 1996.

The complaint charges Oakley, a manufacturer of sunglasses, Oakley's Chairman and President, Oakley's Chief Executive Officer, Oakley's Chief Financial Officer and two investment banking firms which acted as underwriters for Oakley and its top insiders in a huge $230 million stock offering in June 1996, with violations of the California Corporations, Civil and Business and Professions Codes.

The complaint alleges that these defendants artificially inflated Oakley's stock from $17 near the beginning of the Class Period to as high as $27-3/16 in late May 1996 by representing that Oakley's restrictive retail distribution strategy limiting its retailers was working, Oakley was enjoying very strong demand for its products and sales growth even without introducing new products, Oakley was successfully developing important product extensions and new products which would be introduced late in 1996 -- all of which would result in Oakley achieving substantial year-over-year quarterly earnings per share ("EPS") gains throughout 1996 and 1997.

As Oakley's stock soared upward from the mid-teens in the spring of 1996 to its all-time high in late May 1996, Oakley and its top insiders took advantage of this by completing a huge secondary public offering of Oakley stock on June 6, 1996, in which Oakley's founder and Chairman, Jim Jannard and its Chief Executive Officer, Mike Parnell sold 9 million and 1 million shares of Oakley stock respectively, at $23.81 per share, pocketing $205.2 million and $22.8 million, respectively.

However, within six weeks after the huge secondary offering, Oakley's stock collapsed back to $15-3/8, as rumors circulated that Oakley's largest customer, Sunglass Hut, was suffering a sales slowdown which would hurt Oakley's business and that Oakley was accumulating excessive inventories.

However, defendants denied that Sunglass Hut's difficulties were hurting Oakley or that Oakley had excessive inventories and affirmatively represented that Oakley was enjoying strong sell through of its products at Sunglass Hut and strong demand and re-orders from Sunglass Hut and that Oakley was introducing product line extensions and new products which would lead to strong fourth quarter 1996 and 1997 results for Oakley. This drove Oakley's stock back up to $24-1/2 in Sept. 1996.

However, Oakley's stock again declined in Oct. 1996, when Sunglass Hut reported weakening sales and a curtailment of its expansion program. Then on Dec. 5, 1996, Oakley revealed that Sunglass Hut had cancelled all purchase orders through the end of January 1997, that Oakley had delayed introducing product extensions until Dec. 1996, that its most important new product (X-Metal) would not ship in significant quantities until the second or third quarter of 1997 and that Oakley was abandoning its restrictive retail outlet policy and would add 250 retailers to try to stimulate sales.

As a result, Oakley revealed, its EPS for the fourth quarter of 1996 would decline sharply and its 1997 EPS would be much lower than earlier forecast. On Dec. 5, 1996, Oakley's stock fell to an all-time low of $10-5/8 from $15-7/8 on Dec. 4, 1996 -- a 33% one-day decline on over 7 million share volume.

Plaintiffs seek to recover damages on behalf of all purchasers of Oakley common stock during the Class Period (the "Class"). They are represented by several law firms, including Milberg Weiss Bershad Hynes & Lerach LLP, who have expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud.

Milberg Weiss has been actively engaged in commercial litigation, emphasizing securities and antitrust class actions, for more than 20 years. The firm has offices in New York, San Diego, San Francisco and Los Angeles and is active in major litigations pending in federal and state courts throughout the United States. The firm's reputation for excellence has been recognized on repeated occasions by courts which have appointed the firm to major positions in complex multi-district or consolidated litigations.

Milberg Weiss has taken a lead role in numerous important actions on behalf of defrauded investors, and has been responsible for a number of outstanding recoveries which, in the aggregate, total approximately $2 billion. For additional information about Milberg Weiss, see the firm's website at http://www.milberg.com .

If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiffs' counsel, William Lerach of Milberg Weiss at 800/348-6192.

CONTACT: Milberg Weiss

William Lerach, 800/348-6192