Digimarc Faces Legal Challenge: Shareholders File Class Action
N/A, Friday, 18 April 2025.
Digimarc Corporation shareholders are pursuing a class action lawsuit citing financial losses due to alleged misrepresentations by the company. Investors seek accountability with Johnson Fistel leading the legal charge.
Allegations Against Digimarc
The class action lawsuit against Digimarc Corporation (NASDAQ: DMRC) is being organized by Johnson Fistel, a prominent law firm specializing in shareholder rights. The lawsuit pertains to investors who acquired securities between May 2, 2024, and February 26, 2025, a period during which the company allegedly made false statements about its financial health. Specifically, the lawsuit claims that Digimarc failed to inform shareholders about a significant commercial contract that was not renewed, leading to adverse effects on its subscription and annual recurring revenue [1].
Shareholder Discontent
Shareholder unrest has been exacerbated by a 60% drop in Digimarc’s stock price under the leadership of CEO Riley McCormack. Ocho Investments LLC, which holds a substantial 5.2% stake in the company, has been vocal about its dissatisfaction. The firm plans to withhold votes for the CEO and Board Chair Kathleen Kool at the upcoming annual meeting, citing a lack of alignment between management compensation and shareholder interests [2].
Financial Performance and Decline
Recent reports indicate a stark decline in Digimarc’s financial standing, with a fall in its stock from $28.93 on April 12, 2021, to $11.48 on April 16, 2025. Furthermore, the company’s net annual recurring revenue decreased from $19.6 million in Q3 2023 to $16.3 million in Q4 2024. This 17% decline significantly underperformed against analyst expectations [2]. Additionally, Digimarc’s total cash reserves have dwindled from $77.7 million in December 2020 to an estimated $21.7 million as of now. The workforce also saw a reduction from 203 employees to 125, marking a 42% decrease in staffing levels [2].
Legal and Corporate Ramifications
The class action represents a growing trend of accountability demands by investors towards corporate management. Johnson Fistel, which has successfully recovered about $90.7 million for aggrieved clients in previous cases, leads the charge in this legal battle. Investors have until May 9, 2025, to submit their motions to serve as the lead plaintiff, a critical step in representing the interests of the broader class of shareholders [1]. Additionally, possible corporate governance changes loom as shareholder votes at the May 7, 2025, Annual Meeting could lead to the resignations of both the CEO and Chair if they receive more ‘Withhold’ than ‘For’ votes [2].