A law firm in Atlanta, Georgia is currently investigating THQ over claims the publisher made regarding its business, its prospects, its operations and the failed uDraw GameTablet between May 3, 2011 and February 3, 2012.
Specifically, Holzer Holzer & Fistel, LLC seeks to determine whether THQ knew but failed disclose in a timely manner that demand for its uDraw GameTablet was below internal expectations in part due to differences between gamers who play video games on the Nintendo Wii, and those who play games on the Xbox 360 and the PlayStation 3.
"On February 3, 2012, THQ announced it would no longer manufacture or sell the uDraw GameTablet," the firm said on Wednesday. "The Company previously pointed to the expansion of the uDraw GameTablet to the Xbox360 and PlayStation platforms as a source of expected revenue growth."
Essentially what the law firm is claiming is that THQ presented the future expansion of its uDraw tablet to the Xbox 360 and PlayStation 3 as a big source of revenue growth, causing shares to rise. But THQ supposedly knew about the lack of demand for the peripheral and simply discontinued it, saying it was due to poor sales. The "timing" likely means THQ didn't disclose its proper forecast so that investors didn't lose money before the uDraw tablet was discontinued and stock took a tumble.
The investigation is just one of many setbacks for the struggling publisher. Its share price has dropped from over $36 in 2007 to a meager 64 cents today. It's also facing a Nasdaq delisting, was forced to turn its Warhammer MMO to a single-player game, it has closed entire studios, it has dropped and sold entire franchises, and more.
Even more, THQ was left with 1.4 million unsold uDraw units when it discontinued the peripheral in February. On Tuesday, Jason Rubin, the new development executive at THQ, promised that they wouldn't be buried in the desert, referring to the way Atari handled 3 million unsold units of E.T.: The Extra-Terrestrial back in 1983 by burying them in a New Mexico landfill.
"We think we will sell the remaining units [to retailers] by this holiday," he said.