OCZ Technology Plunges After Reports of CEO’s Criminal Record
OCZ Technology Group Inc. (OCZ), the maker of solid-state disk drives, plunged for a second day in Nasdaq trading following a report that the company didn’t disclose its chief executive officer’s criminal record.
The shares of the San Jose, California-based company fell 74 cents, or 9 percent, to $7.49 as of 4 p.m. New York time, after dropping 14 percent yesterday.
Financial website Seeking Alpha reported yesterday that OCZ didn’t disclose CEO Ryan Petersen’s criminal record. Bloomberg West reported after the markets closed that Petersen was convicted in 1998 of a felony that was later amended to a misdemeanor.
“The criminal record makes investors nervous,” said Aaron Rakers, an analyst at Stifel Nicolaus & Co. “There were people out there that were not fully aware of the aspects of the deal and that put pressure on the stock.” Rakers has a “buy” rating on the shares.
In a prospectus for a secondary offering this month, OCZ described the CEO’s “path from an aspiring musician and youthful indiscretions to a storage technology pioneer.” The company’s filings with the U.S. Securities and Exchange Commission don’t mention the conviction. In OCZ’s last annual report, filed May 20, 2010, Petersen was described as “the inventor or co-inventor of much of our proprietary technology.”
Stifel Nicolaus and Needham & Co. managed the offering. Stifel’s Rakers said “it was a known element from our standpoint participating in the deal.” Needham declined to comment.
“I believe my only felony conviction was for trafficking in stolen property in exchange for marijuana,” Petersen said yesterday in a telephone interview. He said the stolen property was a car stereo. The “youthful indiscretion” language was chosen by the “underwriters’ council,” he said.
“It’s irrelevant information,” said Petersen. “I did a lot of stuff I’m not proud of, but I built a company out of the ground with no venture capital.”
Rule 401(f) of Regulation S-K under the Securities Act of 1934 says a company must disclose if an executive “was convicted in a criminal proceeding or is named subject to a pending criminal proceeding” in the past 10 years. Petersen was convicted of a felony on July 24, 1998. The judgment was amended to a misdemeanor on March 3, 2006. The OCZ secondary offering was April 7, 2011.
Florence Harmon, a spokeswoman for the SEC, declined to comment.
Solid-state disk drives don’t contain any moving parts and are smaller and faster than traditional storage drives. Apple Inc. (AAPL) CEO Steve Jobs said in October that laptops with solid- state drives would be “the future of notebooks.” While the Cupertino, California-based company’s MacBook Air contains a solid-state drive, it isn’t made by OCZ.
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