BALA CYNWYD, Pa., Feb. 5, 2002 (PRIMEZONE) -- A shareholder sued Rhythms NetConnections, Inc. ("Rhythms" or the "Company") (Nasdaq:RTHMQ) claiming that the company misled investors about its business and financial condition, as alleged in a complaint filed by the law firm of Schiffrin & Barroway, LLP.
The complaint was filed in the U.S. District Court for the District of Colorado and seeks damages for violations of federal securities laws on behalf of all investors who bought Rhythms NetConnections, Inc. securities between January 6, 2000 and April 2, 2001 (the "Class Period").
Schiffrin & Barroway, LLP has prosecuted shareholder class actions for over fourteen years and has recovered more than $1 billion for investors. If you are a shareholder of Rhythms NetConnections, Inc. and want to learn more about this lawsuit and about becoming a lead plaintiff, you may visit our website at www.sbclasslaw.com.
The complaint alleges that the Colorado-based Rhythms NetConnections, Inc. portrayed itself as a fast-growing and expanding provider of DSL services and repeatedly represented that it could continue to expand its broadband network throughout the United States and reassured investors that it was financially able to continue this expansion.
As alleged in the Complaint, defendants' statements issued throughout the Class Period were materially false and misleading when made as they failed to disclose the following adverse facts which were then known to defendants or recklessly disregarded by them: (i) that Rhythms lacked the financial resources necessary to execute its business plan of a full national network expansion; (ii) that the Company's efforts to scale back its expansion plans were not meeting with success as the Company was unable to generate the necessary financing; (iii) that Rhythms was not well-funded or well-positioned to continue its growth, as the Company's expenses, including its ongoing debt payment obligations, were far outpacing its revenues and rapidly depleting the Company's cash reserves; (iv) that the Company did not have adequate cash reserves and was not sufficiently "stable" and "financially strong" that it would be able to fund Rhythms' operational needs into the first quarter of 2002, as defendants repeatedly promised investors -- defendants were not even able to keep Rhythms running though 2001, as it had earlier guaranteed; and (v) that without the influx of additional capital, Rhythms would be forced to seek bankruptcy protection, which would render Rhythms common stock worthless.
While in possession of the true facts about Rhythms and its business, the Individual Defendants and other Rhythms insiders collectively sold 600,000 shares of Rhythms common stock for gross proceeds in excess of $16 million -- of which over $12.6 million alone was received by defendant Hapka -- and the Company raised hundreds of millions of dollars in preferred stock sales and debt issuances.
If you purchased Rhythms NetConnections, Inc. securities during the period of January 6, 2000 through April 2, 2001, you may be a member of the class and have until March 11, 2002 to move the court to become a lead plaintiff. To learn more about your rights and interests in this case and your ability to potentially recoup your losses, please contact Schiffrin & Barroway directly at 888-299-7706 (toll free) or 610-822-2221, fax number 610-822-0002, e-mail at info@sbclasslaw.com or visit our website at www.sbclasslaw.com.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca