SearchMedia Holdings Limited f/k/a Ideation Acquisition Group

Case Details

Class Period: April 1, 2009 - August 20, 2010
Date Filed: September 13, 2010
Case Number: 1:11-cv-20549
Jurisdiction: Southern District of Florida
icon-casetype Case Type: Securities Case

Case Summary

The Complaint brought forth claims for violations of the Securities Exchange Act of 1934 against SearchMedia Holdings Ltd. (“SearchMedia” or the “Company”), and certain senior executives involved in a merger.  The Complaint alleged that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired SearchMedia or Ideation common stock during the Class Period.

The allegations in the Complaint arose out of the merger between Ideation (a blank check company formed for a period of two years for the purpose of acquiring another company) and SMIL, an integrated operator of outdoor billboard and in-elevator advertising networks headquartered in China. Plaintiffs alleged that, as the two-year time period for the existence of Ideation was drawing to an end, the Ideation Defendants identified SMIL as a merger target, held discussions, and proceeded to engage in a severely reckless due diligence process. On April 1, 2009 Ideation announced that it had entered into an agreement and plan of merger (the “Merger”) with SMIL. After the announcement, Defendants recklessly touted the financial health of the Company and the purported benefits of the Merger in a series of public statements made in press releases, conferences and SEC filings, in order to entice shareholders to vote for the Merger. A final Proxy/Prospectus was issued on October 5, 2009 and the Merger was consummated on October 30, 2009. The surviving company was SearchMedia.  SearchMedia soon experienced instability in the in-elevator advertising market and problems integrating its various advertising channels. On March 31, 2010, SearchMedia announced that its review of the Company’s 2009 financial results was taking longer than expected, and that the actual results “will likely result in significant adjustments” from the previously disclosed estimates. Over the next several months, SearchMedia released another series of public statements that allegedly misled investors as to the Company’s true financial condition.   Then on August 20, 2010, SearchMedia announced that its 2007 and 2008 revenue (that was in fact SMIL’s revenue prior to the Ideation-SMIL merger) was overstated by approximately $6 million and $25 million.  On this news, over the next two trading days, SearchMedia’s stock price plummeted 50%, to close at $1.70.

Lead Plaintiffs filed an Amended Complaint on April 11, 2011.   On August 8, 2011, the Court denied in part Defendants’ Motion to Dismiss finding the Complaint sufficiently pled that Defendants negligently made statements regarding their due diligence of SMIL.

Serving as Co-Lead Counsel, Saxena White, P.A., consulted with a widely-respected damages expert, who analyzed in detail various damages scenarios in preparation for a mediation that was conducted on September 22, 2011.  The firm successfully obtained a partial settlement with Defendants, who did not reside in China, in the amount of $2,750,000 on behalf of the Class.   On January 10, 2012, the Court preliminary approved the partial settlement, and on April 23, 2012, the Court entered partial final judgment finding the settlement to be fair, adequate and reasonable.