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Angie's List hit with shareholder suit

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Angie’s List’s CEO William Oesterle and four other top executives made a series of false or misleading statements about the company’s prospects that inflated its stock price earlier this year as they sold $13 million of their own shares, a lawsuit seeking class-action status alleges.

Bringing the case on behalf of shareholders Eva and Harold Baron is Robbins Geller Rudman & Dowd LLP, a national securities litigation firm that led $7.3 billion in settlements for former investors of scandal-plagued energy giant Enron Corp.

Robbins Geller said it filed the suit on Monday in U.S. District Court for the Southern District of Indiana, which on Tuesday was closed for the holidays.  

The suit alleges multiple violations of federal securities regulations and seeks unspecified financial damages on behalf of common shareholders between Feb. 14 and Oct. 23 of this year.

The 27-page complaint said Oesterle was the biggest benefactor, selling 486,400 shares for a net $10.4 million.  

Also listed as defendants are co-founder and chief marketing officer Angela Hicks Bowman; controller Charles Hundt; former chief financial officer Robert R. Millard; and former chief technology officer Manu Thapar.

Broadly, the suit recounts a litany of positive statements made by Oesterle and other executives during earnings calls and in presentations to analysts and shareholders.  

In fact, the Indianapolis-based firm that provides reviews of service providers (such as plumbers and roofers) by its members exceeded analysts' expectations during much of 2013.

“Based on the positive mantra” of executives, the suit alleges, Angie’s stock price hit a high of $28 last July. At the same time, executives were selling shares, “with the price of the company’s stock artificially inflated based on their misstatements.”

A key issue in the complaint is that the company was increasingly relying on providing free memberships in order to “artificially” boost its subscriber figure.

The suit cites an interview that The Wall Street Journal conducted with Oesterle that indicated  Angie’s was cutting the subscription cost for new members in New York, Chicago, San Francisco, Washington, D.C., and Indianapolis to $10 from $40.

The market didn’t respond well to the news, with Angie’s shares falling more than 17 percent on Oct. 3.   

The stock would fall from $28 earlier in the summer to a low of around $12 this fall. In trading Tuesday morning, shares had dropped 2.5 percent to $14.27.

The company went on to report a third quarter loss of $13.5 million, or 23 cents a share, which was worse than the 20-cents-per-share loss that analysts were led to expect “based on defendants’ bullish” statements, the suit alleges.

Angie’s List spokeswoman Cheryl Reed said Tuesday that the company would have no comment about the lawsuit.

Robbins Geller’s local counsel is Parr Richey Obremskey Frandsen & Patterson LLP.

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  • Good concept
    Oh. So, you think it is a good concept to have Service Providers pay to receive a recognition reward in the magazine? You think it is a good business model to lie about how many subscribers you have, have no stats to show advertisers, and offer free memberships so that it looks like more people are using their service than they are? Angie is desperate to con service providers in to believing that her site actually generates leads that justify the cost. People should learn to evaluate their advertising spend on a Cost per thousand ( CPM) basis. You will see that Angies List is a ripoff if they even give you the numbers to do the calculation.
  • Rape the Service Providers ..thats the business model
    This company is a total ripoff. 1. They want customers to pay to find reviews. 2. They want service providers to pay to be at the top of the list. 3. Even worse they want service providers to pay to be showcased when the service provider gets good reviews. Yes. Did you read that right? YES. Angie wants service providers to pay for their service awards. How much of a low life can you be? Seriously, where was this woman raised? Under a rock?
  • Sue HER for everything she is worth
    Angies List is a total ripoff for advertisers. They inflate how many subscribers they have and they charge an arma and a leg for a site that produces little to no results. I think she should be put in jail for FRAUD and that is exactly what this company is. They harrass unless relentlessly to use advertise with them and then you talk to some newby almost every 2 weeks. They try to say they are reassigned to a different market. How stupid do they think we are are. Ms Hicks should give it up! Get lost and go take the money you have pilfered and retire somewhere you FRAUD.
  • j !!!!!
    my guess j you work for angies list if you do im sure your next job will a job of honesty because angies list as far as im concerned is as lowlife to the american consumer and working man as they come, her model obviously is not her standard.
  • lmao
    i agree they did me wrong which i have brought to the attention of my attorney, there attorneys will have to come to new england where angie hicks or her ripoff sidekicks hold no weight as far as there workers maddoff and angie can set you up for your next job.
  • I paid AL to be a recommended service provider
    Angie's list was helpful for my company (masonry) in the suburbs of New Jersey. But what customers don't know is that we are able to pay to be placed as a top service provider. When you first sign up, they have a sales person contact you and up sell you. How else would a new company without any good reporting get work? I don't understand how anyone was willing to pay $40 for reviews when yelp, google and BBB all provide free reviews.
    • Build Value Already?!?!?
      Angie's List can be a top tier tech firm. They need to build real value, not just coast off of users content. BUILD A SOA Angie!!! Build technology users need to USE. THAT is why Amazon is so profitable. AL could do the same thing--they just have to DO IT! AL can't coast on "user gen" content -- that ship has sailed.
    • Great Concept?
      "Great concept? "j" must be be employed by Angie's List because nobody outside of Angie's List believe that.
    • Ratings
      I logged on today and gave Angie an F for personality and an A for fraud. When looking for someone to run my Ponzi scheme, I always turn to Angie.
      • Hmmm
        I am not an Angie's List fan but it is intesresting how many people are assuming the allegations are true after hearing only one side of the story. Also remember Amazon.com was highly unprofitable for many many years before turning the corner. Will Angie's List do the same? My guess would be "No" but I am far from an expert in this area.
      • Concept
        Im guessing some of the companies who struggled on Angie's List are writing about a stupid concept. The concept is great, since they have more verified reviews that people can actually trust, unlike a Yelp who hides all positive reviews and only displays negative reviews unless you pay them money (you can check their lawsuit as well). I dont know google that well so i cant comment on them. I do agree they spend way too much on advertising which has helped them lose so much money over the years. This obviously wont help their growth.
        • jamezmaximus@yahoo.com
          Since GOP took over Governers office, Indiana leads the country in white collar crime
        • Shark Tank
          Can you imagine Bill Oesterle and Angie Hicks on Shark Tank explaining their business model to the Sharks and trying to convince them to invest? They would be ripped apart. Then they would reveal that not only is it a bad business model, Angie's List has lost money for like 18 years in a row. It has never made money. At that point, the Sharks would want to know how they even got on the program. Seriously it is unbelievable that people still buy Angie List stock.
        • Ponzi Scheme
          From the initial public offering, far too many people warned the general public about Angie's List, and as the officers of the company were dumping stock ahead of the price decrease for members fees, it started to make sense. Pump and Dump, and the investors took a real bath on this one.
        • Hmmmm
          Interesting timing huh http://tickerreport.com/banking-finance/96055/angies-list-director-unloads-292500-in-stock-angi/
        • Agreed
          I agree with Bill. This was a stupid idea from the start and they spend WAY too much money advertising. Nothing beats word of mouth and that is always free. Angie's List is too easy to manipulate. Dumb idea.
        • Land Sale
          That was completely brushed under the rug. In a time when cash is king with this company, the company decides to pay cash for its building, in a rather sketchy part of town from its 'CEO' for well above market? Talk about bleeding the company dry!
        • Stupid Concept
          Good, it's a stupid idea to begin with. Seriously...lets charge for reviews of a company...when you can do it for free on Google. The Angie's Awards that companies get are completely bogus and easy to obtain.
        • D&O Insurance
          Private and public companies should, most certianly purchase D&O insurance. Many do not and risk the assets of the company and the personal assets of the directors in the belief a lawsuit will never come. Shareholder suits are prominent for public companies but for private companies most lawsuits come from employees and third parties alleging wrong doing or mismanagment. It will be interesting to see who the insurance carrier is whether they have a duty to defend and sufficient limits to help Angie's List. It never ceases to amaze me when companies like this will pay millions of dollars on incidentals then cut costs on insurance to save a few thousand.
        • You're right Bill
          I bought this stock and am tickled to death about it. Sold out just under it's high earlier this year. It was one of my top 5 this year and paid for the addition on the home. Very happy with Angie's List, very!
        • What about
          How about the money the city and state gave AG for the land that Bill owned and then sold it for an inflated price?
          • Hilarious
            This is pretty funny, and maybe it signals the beginning of the end for the most Indianapolis-esque of all the bushleague Indianapolis startups. An unprofitable company that offers a service nobody cares about, but advertises excessively. Anytime a net-loss company goes public it's always a hilarious attempt to pump and run by the founders. If you bought this stock you should have seen this coming.

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