Case 1:13-cv-08364-PAC Document 18 Filed 04/22/14 Page 1 of...

Case 1:13-cv-08364-PAC Document 18 Filed 04/22/14 Page 1 of 26

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

x ALEJANDRO MEDINA and ADAM : Civil Action No. 1:13-cv-08364-PAC FURMAN, Jointly and on Behalf of All Others : Similarly Situated, : CLASS ACTION

: Plaintiffs, : AMENDED COMPLAINT FOR

: VIOLATION OF THE FEDERAL vs. : SECURITIES LAWS

TREMOR VIDEO, INC., WILLIAM DAY, : TODD SLOAN, LAURA DESMOND, DEMAND FOR JURY TRIAL

: RANDALL GLEIN, RACHEL LAM, : WARREN LEE, JAMES ROSSMAN, : ROBERT SCHECHTER, CREDIT SUISSE : SECURITIES (USA) LLC, JEFFERIES LLC, : CANACCORD GENUITY INC. and : OPPENHEIMER & CO. INC., :

: Defendants.

: x


Lead Plaintiff Alejandro Medina and additional Plaintiff Adam Furman (collectively,

“Plaintiffs”) allege the following based upon the investigation of Lead Counsel, which included a

review of United States Securities and Exchange Commission (“SEC”) filings by Tremor Video, Inc.

(“Tremor” or the “Company”), as well as regulatory filings and reports, securities analysts’ reports

and advisories about the Company, press releases and other public statements issued by the

Company, interviews with former employees of Tremor, interviews with other persons

knowledgeable about Tremor’s business and the advertising business and media reports about the

Company. Plaintiffs believe that substantial additional evidentiary support will exist for the

allegations set forth herein after a reasonable opportunity for discovery.

NATURE OF THE ACTION

1. This is a securities class action on behalf of all purchasers of the common stock of

Tremor pursuant and/or traceable to the Registration Statement and Prospectus (the “Registration

Statement”) issued in connection with Tremor’s June 27, 2013 initial public stock offering (the

“IPO”), seeking to pursue remedies under the Securities Act of 1933 (the “Securities Act”).

JURISDICTION AND VENUE

2. The claims asserted herein arise under and pursuant to §§11 and 15 of the Securities

Act. This Court has jurisdiction of this action pursuant to §22 of the Securities Act [15 U.S.C. §77v]

and 28 U.S.C. §1331.

3. Venue is properly laid in this District pursuant to §22 of the Securities Act and 28

U.S.C. §1391(b) and (c). The acts and conduct complained of herein occurred in substantial part in

this District, Tremor is headquartered in this District and the Underwriter Defendants (defined

below) maintain their principal places of business in this District.


4. In connection with the acts alleged in this Complaint, Defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to,

the mails, interstate telephone communications and the facilities of the national securities markets.

PARTIES

5. Lead Plaintiff Alejandro Medina purchased Tremor common stock traceable to the

IPO, as set forth in his certification previously filed and incorporated by reference herein, and was

damaged thereby. Plaintiff Adam Furman purchased Tremor common stock, as set forth in his

certification filed herewith and incorporated by reference herein, traceable to the IPO, and was

damaged thereby.

6. Defendant Tremor is a provider of technology-driven video advertising solutions for

advertisers and agencies, and publisher partners in the United States and internationally,

headquartered in New York, New York. Following the IPO, Tremor stock has traded on the New

York Stock Exchange (“NYSE”) under the ticker symbol “TRMR.”

7. Defendant William Day (“Day”) is, and was at the time of the IPO, Tremor’s

President, Chief Executive Officer (“CEO”) and a director.

8. Defendant Todd Sloan (“Sloan”) is, and was at the time of the IPO, Tremor’s Senior

Vice President, Chief Financial Officer (“CFO”) and Treasurer, having assumed that position in

December 2011.

9. Defendant Laura Desmond (“Desmond”) was at the time of the IPO and at the

commencement of this action a director of Tremor. Desmond resigned from the Tremor Board

shortly after the IPO.

10. Defendant Randall Glein (“Glein”) was at the time of the IPO and the initiation of this

action on November 22, 2013 a director of Tremor, having assumed that role in April 2010. On

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March 25, 2014, Defendant Glein advised Tremor that he was resigning from the Tremor board

effective on the day of the Company’s 2014 Annual Meeting of Stockholders.

11. Defendant Rachel Lam (“Lam”) is, and was at the time of the IPO, a director of

Tremor.

12. Defendant Warren Lee (“Lee”) is, and was at the time of the IPO, a director of

Tremor, having joined in 2006.

13. Defendant James Rossman is, and was at the time of the IPO, a director of Tremor.

Defendant Rossman has served on the Tremor board since January 2011 and served as the Chairman

of its board from August 2012 to May 2013, resigning that position just prior to the IPO.

14. Defendant Robert Schechter (“Schechter”) is, and was at the time of the IPO, a

director of Tremor, having been appointed in June 2013 just prior to the IPO.

15. The defendants named in ¶¶7-14 are referred to herein as the “Individual

Defendants.” The Individual Defendants each signed the Registration Statement.

16. Defendant Credit Suisse Securities (USA) LLC (“Credit Suisse”), based in New

York, New York, is a financial services company that advises clients in all aspects of finance,

serving companies, institutional clients and high-net-worth private clients worldwide. Credit Suisse

acted as an underwriter and joint book-running manager of Tremor’s IPO, helping to draft and

disseminate the offering documents.

17. Defendant Jefferies LLC (“Jefferies”) is an American global investment bank and

institutional securities firm headquartered in New York, New York. Jefferies acted as an

underwriter and joint book-running manager of Tremor’s IPO, helping to draft and disseminate the

offering documents.

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18. Defendant Canaccord Genuity Inc. (“Canaccord Genuity”) is a New York, New

York-based global, full-service investment bank. Canaccord Genuity acted as an underwriter and

joint book-running manager of Tremor’s IPO, helping to draft and disseminate the offering

documents.

19. Defendant Oppenheimer & Co. Inc. (“Oppenheimer”) is a New York, New York-

based investment bank and full-service investment firm that provides financial services and advice to

high net worth investors, individuals, businesses and institutions. Oppenheimer acted as an

underwriter and joint book-running manager of Tremor’s IPO, helping to draft and disseminate the

offering documents.

20. The defendants named in ¶¶16-19 are referred to herein as the “Underwriter

Defendants.” Pursuant to the Securities Act, the Underwriter Defendants are liable for the false and

misleading statements in the Registration Statement as follows:

(a) The Underwriter Defendants are investment banking houses that specialize,

inter alia, in underwriting public offerings of securities. They served as the underwriters of the IPO

and shared $5.25 million in fees collectively. The Underwriter Defendants determined that in return

for their share of the IPO proceeds, they were willing to merchandize Tremor stock in the IPO. The

Underwriter Defendants arranged a multi-city roadshow prior to the IPO during which they, and

representatives from Tremor, met with potential investors and presented highly favorable

information about the Company, its operation, and its financial prospects;

(b) The Underwriter Defendants also demanded and obtained an agreement from

Tremor that Tremor would indemnify and hold the Underwriter Defendants harmless from any

liability under the federal securities laws. They also made certain that Tremor had purchased

millions of dollars in directors’ and officers’ liability insurance;

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(c) Representatives of the Underwriter Defendants also assisted Tremor and the

Individual Defendants in planning the IPO, and purportedly conducted an adequate and reasonable

investigation into the business and operations of Tremor, an undertaking known as a “due diligence”

investigation. The due diligence investigation was required of the Underwriter Defendants in order

to engage in the IPO. During the course of their “due diligence,” the Underwriter Defendants had

continual access to confidential corporate information concerning Tremor’s operations and financial

prospects;

(d) In addition to availing themselves of virtually unbridled access to internal

corporate documents, agents of the Underwriter Defendants met with Tremor’s lawyers,

management and top executives and engaged in “drafting sessions” between at least March 2013 and

June 2013. During these sessions, understandings were reached as to: (i) the strategy to best

accomplish the IPO; (ii) the terms of the IPO, including the price at which Tremor stock would be

sold; (iii) the language to be used in the Registration Statement; (iv) what disclosures about Tremor

would be made in the Registration Statement; and (v) what responses would be made to the SEC in

connection with its review of the Registration Statement. As a result of those constant contacts and

communications between the Underwriter Defendants’ representatives and Tremor management and

top executives, the Underwriter Defendants knew, or should have known, of Tremor’s existing

problems as detailed herein; and

(e) The Underwriter Defendants caused the Registration Statement to be filed

with the SEC and declared effective in connection with offers and sales thereof, including to

Plaintiffs and the Class.

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SUBSTANTIVE ALLEGATIONS

The Company and the IPO

21. Defendant Tremor provides an in-stream video ad network for Internet-connected

devices like computers, smartphones and tablets. The Company derives substantially all of its sales

revenue by delivering in-stream video advertising on behalf of brand advertisers in the United States

through the Tremor Video Network.

22. In December 2010, Tremor acquired ScanScout, Inc. (“ScanScout”) thereby acquiring

ScanScout’s “VideoHub” video analysis and optimization technology.

23. Following the ScanScout acquisition, in May 2011, Tremor launched its own version

of the VideoHub in-stream video ad analytics platform. VideoHub analyzes instream video content

both in and out of the Tremor Video Network. VideoHub for Advertisers (“VHA”) provides

advertisers with analytical tools for online video ad campaign optimization.

24. According to Tremor, the VideoHub comprehensive video advertising management

platform provides extensive analytics required to conduct a cost effective online advertising

campaign. In addition to real-time advertising campaign reporting, VideoHub users can analyze data

versus past campaign performance. In addition, VideoHub highlights variables that affect brand lift,

purchase intent, engagement and optimal reach versus frequency – important metrics for directing an

effective online advertising campaign.

25. For instance, “viewability” in online video advertising is an important metric,

compared to television advertising. It assures advertisers that the ad they paid to deliver to a

particular viewer on a particular site was indeed “viewable” to that viewer. VideoHub’s technology

measures browser size, the portion of the browser page that is in view, the video player’s position on

the browser page and the video player’s size. VideoHub also filters for fraudulent and “non-human”

activity. It provides a way to fight fraud and other less-than-savory practices that run up online

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advertising bills without delivering eyeballs. Conversely, in television advertising, “viewability” is

not a real issue. Other metrics the VideoHub measures are:

• “Engagement Rate”: For interactive ad units, this metric measures when a user either clicks on an interactive button or feature within the ad unit (to see additional videos, etc.) or rolls over a trigger on the ad unit for at least three seconds.

• “Clicks”: Measures when a user clicks on a video ad while it’s playing. The metric focuses on only measuring intentional activity among consumers and not fraudulent activity by robots or spiders.

• “Served Digital Video Impressions”: Measures served impressions. VideoHub says this means impressions are counted only after the video stream has begun, post-buffering, while also filtering out fraudulent activity.

• “Unique Cookies Reach”: A filtered count of unique cookies representing unduplicated instances of access to video ads during a measurement period. In other words, an unduplicated count of video ad views.

26. As Underwriter Defendant Jefferies published in a report initiating coverage on

Tremor in July 2013, the Company’s business model melds content it purchases with ad campaign

space it sells and promises to do so in a cost efficient manner for the advertising customer:

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:D bio, -TREMOR' VIDEO

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•— IBM

27. In May 2013, VideoHub was the first ad-tech system to receive Media Rating Council

(“MRC”) accreditation specifically for its ability to measure video ad viewability (amongst the four

other measurable metrics). The MRC is a non-profit group of television, radio, print and online

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companies, as well as advertisers, agencies and trade associations, set up in 1964 to validate the

effectiveness of various measurement services and tools. VideoHub was the first ad-tech system

focused on online video —viewability able to receive an MRC accreditation and this purportedly

gave Tremor an edge in making sales.

28. On April 3, 2013, Tremor filed a confidential Registration Statement on Form S-1

(No. 333-188813) with the SEC, which would later be utilized for the IPO following several

amendments in response to comments by the SEC.

29. On June 24, 2013, one week before the end of its second quarter of 2013, Tremor

requested that the SEC declare its Registration Statement effective on June 26, 2013 at 4:00 pm

Eastern Time, or as soon thereafter as practicable.

30. On June 26, 2013, the SEC declared the Registration Statement effective at 4:30 pm

Eastern Time.

31. On or about June 27, 2013, Tremor and the Underwriter Defendants priced the IPO

and filed the final Prospectus for the IPO, which forms part of the Registration Statement

(collectively, the “Registration Statement”). Tremor sold 7.5 million shares of Tremor common

stock to the public at $10 per share, raising approximately $75 million in gross proceeds for the

Company.

32. The Registration Statement was negligently prepared and, as a result, contained

untrue statements of material facts or omitted to state other facts necessary to make the statements

made not misleading and was not prepared in accordance with the rules and regulations governing its

preparation.

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The Registration Statement Failed to Disclose Certain Trends and Uncertainties that Existed at the Time of the IPO

33. At the time of the IPO, Tremor’s business was experiencing several trends and

uncertainties that were likely to impact its continuing operations and future results. The Registration

Statement should have disclosed these trends and uncertainties, but did not.

34. Under instructions to Form S-1, Tremor was required to comply with Item 303 of

Regulation S-K [17 C.F.R. §229.303]. Pursuant to Item 303 of Regulation S-K [17 C.F.R.

§229.303], and the SEC’s related interpretive releases thereto, including any known trends, issuers

are required to disclose events or uncertainties that have had or are reasonably likely to cause the

registrant’s financial information not to be indicative of future operating results.

35. In 1989, the SEC issued an interpretive release on Item 303 and the disclosure

required under the regulation. See “Management’s Discussion and Analysis of Financial Condition

and Results of Operations,” SEC Release No. 33-6835, 1989 SEC LEXIS 1011 (May 18, 1989)

(hereinafter referred to as the “1989 Interpretive Release”). In the 1989 Interpretive Release, the

SEC stated that:

Required disclosure is based on currently known trends, events and uncertainties that are reasonably expected to have material effects, such as: A reduction in the registrant’s product prices; erosion in the registrant’s market share; changes in insurance coverage; or the likely non-renewal of a material contract.

* * *

A disclosure duty exists where a trend, demand, commitment, event or uncertainty is both presently known to management and reasonably likely to have material effects on the registrant’s financial condition or results of operation.

Id. at *12-*13.

36. Furthermore, the 1989 Interpretive Release provided the following test to determine if

disclosure under Item 303(a) is required:

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Where a trend, demand, commitment, event or uncertainty is known, management must make two assessments:

(1) Is the known trend, demand, commitment, event or uncertainty likely to come to fruition? If management determines that it is not reasonably likely to occur, no disclosure is required.

(2) If management cannot make that determination, it must evaluate objectively the consequences of the known trend, demand, commitment, event or uncertainty, on the assumption that it will come to fruition. Disclosure is then required unless management determines that a material effect on the registrant’s financial condition or results is not reasonably likely to occur.

Id. at *19.

37. At the time of the IPO, Tremor’s business was experiencing several trends and

uncertainties that were likely to impact its continuing operations and future results, as detailed

below. The Registration Statement should have disclosed these trends and uncertainties, but did not.

38. Delays in Completion of Television Network Upfront Ad Sales : by the time of the

IPO, two of the major television networks – NBCUniversal and ABC – had not completed their

upfront advertising sales which would likely cause Tremor customers to delay online advertising

decisions. Such upfront ad sales have historically been completed in early to mid-June.

39. In the North American television market, the major television networks generally

announce their fall primetime schedules in mid-May and then hold ad sales for the upcoming

television season. These sales have historically been completed by the first/second week of June.

The sales are referred to as “upfronts” because they enable advertisers to purchase ad space

“upfront” or several months before the television season starts.

40. The following chart sets forth the dates for the completion of upfront ad sales for

2012 and 2013 and shows that NBCUniversal and ABC completed their upfront ad sales

significantly later in 2013 than in 2012:

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Network Television “Upfront” Ad Sales

Network Date Complete 2012 Date Complete 2013

NBCUniversal June 13, 2012 July 30, 2013 ABC June 12, 2012 August 1,2013 CW June 7, 2012 June 5, 2013 CBS June 12, 2012 June 7, 2013 Fox June 13, 2012 June 12, 2013

41. Thus, by the date of the IPO, June 29, 2013, two of the major television networks had

not completed their upfront ad sales. This meant that it was highly likely that Tremor customers

would be delayed in their online advertising purchases. The fact that Tremor customers might be

delayed in their purchases due to fact that NBCUniversal and ABC had not completed their upfront

ad sales was material information that was required to be disclosed in the Registration Statement, but

was not.

42. Industry Trend Toward Demographic Pricing : at the time of the IPO, the trend in

the online advertising industry was towards demographic pricing as the industry was slow to accept

performance-based compensation models.

43. Under performance-based pricing, Tremor is compensated only when viewers

actively engage with advertisers’ campaigns, such as by interacting with the elements of the video ad

through clicks or screen touches or by rolling over certain elements of the video ad for at least three

seconds, and a cost per video completion pricing model where Tremor is compensated only when a

viewer completes the video ad.

44. Demographic-based pricing is lower margin than performance-based pricing. In

general under demographic pricing, an advertiser pays based on the number of impressions that are

delivered to a target demographic.

45. At the time of the IPO, Tremor customers were increasingly resistant to performance-

based pricing and were opting for the lower margin demographic-based pricing. This trend – which

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could lead to lower profit margins for Tremor – was material information that was required to be

disclosed in the Registration Statement, but was not.

46. Weak Programmatic Product Offerings : at the time of the IPO, Tremor lacked

sufficient programmatic video offerings and, therefore, was losing such sales to competitors. This

was material information that was required to be disclosed in the Registration Statement, but was

not.

The Registration Statement Contained Inaccurate Statements of Material Fact

47. The Registration Statement positively portrayed the Company’s revenues, operating

costs and profit trends, stating, in pertinent part, as follows:

From 2011 to 2012, our revenue increased from $90.3 million to $105.2 million. This included an increase in revenue derived from the delivery of in-stream video advertising from $75.5 million to $99.7 million, or 32.1%. Additionally, over this period, our gross margin improved from 35.2% to 41.7%, driven in part by the adoption of our performance-based pricing models, while our net loss has decreased from $21.0 million to $16.6 million. For the three months ended March 31, 2013 as compared to the same period of 2012, our revenue increased from $17.3 million to $24.8 million, or 43.4%, our gross margin improved from 31.9% to 44.1% and our net loss decreased from $9.1 million to $5.2 million. For the three months ended March 31, 2012 and 2013, our revenue from the delivery of in-stream video advertising increased from $15.7 million to $24.0 million, or 52.9%. As a percentage of total revenue, revenue attributable to performance-based pricing for 2011, 2012 and the three months ended March 31, 2013 was 7.9%, 22.7% and 36.1%, respectively.

*

We . . . initially . . . delivered both video display and banner ads. . . . In 2011, . . . consistent with our focus on being a strategic partner for brand advertisers, we decided to focus our business solely on in-stream video advertising and to move away from in-banner video advertising. In-stream video ads are better suited for brand advertisers because they can be served to viewers immediately prior to or during the publisher’s content commanding attention when viewers are most engaged as opposed to in-banner video ads, which are served on the periphery of publisher content where viewers may not direct their attention. We believe our market opportunity and growth prospects will be enhanced by our focus on in-stream video ads because such ads are better suited to address advertisers’ brand-centric goals. As such, we have increased our technology investments and sales focus on our in-

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stream products and deemphasized investments in and sales of in-banner products. As a result of our focus on delivering in-stream advertising coupled with our differentiated optimization technology, we have experienced significant growth in our in-stream video advertising revenue. From 2011 to 2012, our in-stream video advertising revenue grew from $75.5 million to $99.7 million, or 32.1%, and for the three months ended March 31, 2012 and 2013, our in-stream video advertising revenue grew from $15.7 million to $24.0 million, or 52.9%.

*

As viewers increase time spent viewing video on internet-connected devices such as smartphones and tablets, we expect brand advertisers to devote increasing amounts of advertising spend to these channels . Smartphones and tablets are inherently interactive and we believe that our in-stream advertising capabilities and higher margin CPE pricing model is well suited to address the growing market for mobile video ads. As a percentage of total revenue, revenue attributable to performance-based pricing, such as CPE and CPVC, for 2011 and 2012 was 7.9% and 22.7%, respectively, and for the three months ended March 31, 2012 and 2013, was 14.2% and 36.1% respectively. We intend to continue to increase the sales of video ad campaigns with performance-based pricing to drive revenue growth and increased margins .

*

We monitor the key metrics set forth in the table below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies .

Year Ended December Three Months Ended March 31, 31,

2011 2012 2012 2013 (dollars in thousands)

Revenue $ 90,301 $ 105,190 $ 17,272 LI Gross margin 35.2% 41.7% 31.9% LI Net loss $ (21,025) $ (16,644) $ (9,127) LI In-stream advertising

$

$

24,765 44.1%

(5,159)

revenue

$ 75,500 $ 99,678 $ 15,745 $ 23,996 F1 Adjusted EBITDA

$ (10,927) $ (7,218) $ (6,665) $ (2,797) 1

48. The Registration Statement represented that “[t]he increase in revenue from the three

months ended March 31, 2012 compared to the three months ended March 31, 2013 was primarily

attributable to a $8.3 million increase in our in-stream video advertising revenue, representing 52.9%

1 All emphasis is added unless otherwise noted.

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growth period-over-period, which included an increased mix of our performance-based ad products

compared to our CPM-priced ad products, and a $0.3 million increase in revenue from licensing

solutions.”

49. The Registration Statement represented that “[t]he increase in our gross profit from

the three months ended March 31, 2012 compared to the three months ended March 31, 2013 was

driven by a 43.4% increase in revenue partially offset by a 17.6% increase in our cost of revenue,”

and that “[h]istorically, our performance-priced ad campaigns have offered higher gross margins

than our traditional CPM2 priced campaigns. The 12.2 percentage point improvement in our gross

margin from 2012 to 2013 was primarily attributable to the relative mix of our performance-priced

ad campaigns compared to our CPM-priced ad campaigns as well as greater operational efficiency.”

50. The Registration Statement positively described the Company’s growth and

represented that the third and fourth quarters historically represented the largest percentage of the

Company’s revenues. The Registration Statement stated, in pertinent part, as follows:

We have experienced rapid growth since our inception. For instance, we migrated our business from in-banner video advertising to in-stream video advertising and placed a greater focus on performance-based pricing over the last two years. These changes have resulted in substantial growth in our revenue and corresponding increases in operating expenses to support our growth . . . .

*

Our quarterly revenue has increased from $22.3 million for the quarter ended June 30, 2011 to $24.8 million for the quarter ended March 31, 2013, and our gross margin has increased from 37.5% to 44.1% over the same period. Our increase in quarterly revenue was mainly due to an increased number of advertisers using the Tremor Video Network and increased spending from our existing advertisers as well an increased percentage of our campaigns priced on a performance basis. We believe revenue for the second and third quarters of 2011 was relatively flat due to a reduction in video advertising spending because of uncertainty and volatility caused by the U.S. budget and European financial crises during the third quarter of 2011. Our increase in gross margin in 2012 has been largely the result of an increased

“Cost per mille” – the advertising cost per thousand views.

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percentage of our campaigns priced on a performance basis. Our in-stream advertising revenue as a percentage of revenue has increased for each quarter from June 30, 2011 through March 31, 2013, as we shifted our focus away from the delivery of in-banner video ads to in-stream video ads.

Our revenue also tends to be seasonal in nature, with the third and fourth quarters of each calendar year historically representing the largest percentage of our total revenue for the year and the first quarter of each calendar year historically representing the lowest percentage of our total revenue for the year. Many of the brand advertisers in the verticals we serve spend significant portions of their advertising budgets during the third quarter, in connection with summer, back to school and entertainment events, and in the fourth quarter, in connection with the holiday season . During the first quarter, our brand advertisers generally devote less of their budgets to ad spending, and as a result, our exclusive publishers generally make a larger proportion of their ad inventory available to us. This combination generally results in lower revenue and gross margins for us during the first quarter of each calendar year . Our revenue for the first quarter of 2012 was adversely impacted by the level of overall spending in the video advertising industry as well as by the seasonal spending trends in the video advertising industry.

51. The statements referenced above in ¶¶47-50 were each inaccurate statements of

material fact because they failed to disclose the following material facts which existed at the time of

the IPO:

(a) that at the time of the IPO, customers were likely to delay advertising

purchases because NBCUniversal and ABC had not yet completed their upfront ad sales;

(b) that customers were increasingly resistant to performance-based pricing and

were opting for the lower margin demographic-based pricing; and

(c) that the Company lacked sufficient programmatic video offerings and,

therefore, was losing such sales to competitors.

52. On November 7, 2013 after the market closed, Tremor issued a press release

announcing its financial results for the third quarter of 2013, the period ending September 30, 2013.

In the press release, Tremor reported that its loss had exponentially expanded to $18.1 million, or

$0.37 per share, on $35.3 million in revenue, compared with a loss of $1.7 million, or $0.22 per

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share, in the 3Q 2012 on $30.2 million in revenue. Tremor also lowered its full-year revenue

forecast to a range of $125 million to $126 million from between $133.7 million and $135.7 million.

53. Following the issuance of the press release, Tremor held a conference call with

analysts and investors to discuss the Company’s earnings and operations. During the conference

call, Defendant Day admitted that Tremor’s “revenue growth in Q3 to some extent and [its] expected

revenue in Q4 to a greater extent [were] being negatively impacted by the delayed TV upfronts , the

deferred ad buying and planning in the quarter and by an increasing shift in video advertising

spend towards programmatic buying .”

54. Defendant Day emphasized that Tremor’s “Q3 and Q4 revenue growth rates [were]

being impacted by a couple of factors,” with “the biggest impact [being] driven by the delayed

resolution of the fall TV upfronts, which stalled online video planning,” with Defendant Day stating

the Company then “expect[ed] a more substantial impact in Q4” from this delayed TV upfronts.

55. Defendant Day also conceded that “[p]rogrammatic video demand driven through

agency trading desks [had been] growing fast and resulted in some advertising spend being diverted

from [Tremor’s] current media offerings,” adding that Tremor’s “programmatic solutions [were] just

gearing up” and that as a result, the Company had not “yet fully benefit[ted] from” them and they

would not “contribute to [Tremor’s] growth” until “next year.”

56. “[D]iv[ing] deeper into the increasing convergence of TV and online buying,

particularly the growth of demo buying in online video,” Defendant Day explained, in pertinent part,

that while Tremor’s “performance-based pricing models continue[d] to drive higher margins than

traditional CPM-priced campaigns,” “adoption of these models in the short term was negatively

impacted by strong demand for demo buying ,” explaining that “[d]emo buying . . . requires that

buyers pay only for ads that were delivered to a specific audience segment,” “[u]nlike performance-

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based pricing models that rely on real-time optimization of data that [Tremor] generate[d], demo

buying [was] old school and currently allow[ed] for limited optimization based on panel data from

third parties.” Defendant Day continued admitting that “ [t]he difficulties in optimizing delivery of

such campaigns produce lower eCPMs, resulting in a negative impact to [Tremor’s] overall

margins. ”

57. Defendant Sloan went on to add that “[p]erformance-based pricing revenue decreased

from 34% of total revenue in the second quarter to 26% of total revenue this quarter, reflecting in

part the shift towards demo-based buying in the quarter,” conceding that the “change in revenue mix

from performance-based pricing to demo-based buying negatively contributed to [Tremor’s] gross

margin, which was 40.3% for the quarter.” Emphasizing that as a result, Tremor “need[ed] to reset

financial expectations for the rest of the year,” Defendant Sloan explained that:

For the fourth quarter, with the delayed TV upfronts and industry shift towards programmatic spending, we expect revenue within the range of $29.5 million to $35.5 million, with non-GAAP adjusted EBITDA loss in the range of $2.6 million to $2.1 million....

For the full year 2013, we expect revenue within the range of $125 million to $126 million. We expect non-GAAP adjusted EBITDA loss for the year to be in the range of $3.2 million to $2.7 million. . . .

58. Questioned by analyst Stephen Ju of Credit Suisse, who stated that “trying to

reconcile [Tremor’s] TV upfront delay commentary and the reason for the lower guidance today,”

“[h]aven’t the upfronts already been completed sometime ago ahead of the current TV season and

haven’t the budgeting decisions already been made? And the shift to demo-based buying you

mentioned as well, I’m trying to understand the impact here. Are you saying that the data you

currently have from your publishers is not sufficient enough to deliver against the campaign needs of

your advertisers?,” Defendant Day responded admitting that as to “demo-based buying,” “first of all,

the demo-based buying is – it’s an industry trend . So, it’s not just us.”

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59. Following up, Stephen Ju continued “I guess what you’re actually saying is that the

advertisers are, I guess, electing to not use the data that is available at their fingertips. . .?,” with

Defendant Day responding by conceding:

Yeah, and it’s because again – it’s because that again, there is something important going on . So, I want to make sure we really address it right. The TV connection to at least premium video and TV buying is real and going on. And the way we’ve seen demo buying pace up pretty substantially in a short of period of time I think is directly indicative of the fact that you’re seeing the TV planning start to ingest at least premium video into that ecosystem. And demographics are just incredibly comfortable for the people who do TV planning and buying . . .

* * *

And so, you saw a combination of two things. More than we’ve ever seen in any other year, the TV upfronts involved packaging the extension sites, as you know ABC.com and ABC and things like that, the extension sites into the upfront itself, which some of the spend-up in the market at the end of this year. The other thing is that the timing, the planning timeframe for planning the digital buy and for the more scattered part of the market, which is where we operate was compacted, it was lessened. And so, from a planning standpoint, planners, sometimes when that happens, start to just look ahead. They say, look, I’ll just focus on 2014 and start to catch up that way because I can’t constantly be behind. I need to make up that time. And so across a number of accounts, we saw that impact. . . the point-in-time situation is one that’s causing us to have to reset our guidance for Q4 based on that.

60. Defendant Day then responded to Oppenheimer’s Jason Helfstein’s further

questioning, engaging in the following colloquy:

<Q - Jason S. Helfstein>: Hey. Thanks. So two questions. One, I guess we’ll just start off, so basically in layman’s terms, what you’re basically saying is those more sophisticated advertisers or buyers are shifting to programmatic buying, which you are not yet doing and then the less sophisticated guys are just continuing to focus on the Nielsen data. So as you guys kind of get caught in the middle, you’re being hurt by that. So I just want to understand if that’s a way to think about it in layman’s terms? And then I've got two follow-ups.

<A - William C. Day>: Yes, the only thing I think I disagree with is the more sophisticated, less sophisticated, and then I think any TV buyer would certainly take exception, Jason. The – it’s just – the TV buyers have years of sophistication around how they buy television, right. So they are coming and first using the tool that they most understand and have invested tons of money in, which is demographics.. . . I do think that they’re just not familiar with the whole idea .. . .

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61. In closing, Defendant Day again admitted that:

So, the issue is that, again, there are infrastructures in the agency world that are built around how television has been purchased, measured and the infrastructure is really built around demographics . And so, I think it would be probably unrealistic to expect that infrastructure with the shift and the sort into open-mindedness to video, that infrastructure to be sort of upgraded that quickly . . .

62. Research analysts with all four of the Underwriter Defendants cut their ratings on

Tremor stock on the morning of November 8, 2013 as follows:

In his report, Jefferies analyst Brian Pitz downgraded his investment rating of the Company to “Hold” from “Buy” and cut his price target on the stock from $13 to $8 per share, emphasizing in pertinent part that “[w]eakness in 3Q13 and 4Q13 Outlook [was] Primarily due to a Shift Towards 1) ‘Demo Buying’, 2) Delayed TV Upfronts & 3) Programmatic Buying,” and adding that “[l]arge secular tailwinds [were] shifting advertising spend to online video advertisements,” that “[p]erformance based pricing [became] more commoditized in Industry,” that “[h]igh margin licensing business fail[ed] to gain traction, remain[ed] close to current revenue level,” the “[l]oss of a key exclusive publisher” and that “[a]dvertising spend shift[ed] away from TV lower than expected”;

In his report, Canaccord analyst Michael Graham downgraded Tremor stock to “Hold” from “Buy” and his price target from $12.50 to $9 per share, noting in pertinent part that “[l]ower gross margin was due primarily to advertisers choosing to buy impression-based advertising based on demographic models, rather than selecting Tremor’s ... CPE ad products”;

In their report, Oppenheimer’s Jason Helfstein and Jed Kelly downgraded their investment rating of the Company from “Outpeform” to “Perform” and cut their price target on the stock from $12 to $6.25 per share, noting in pertinent part that, “Management comments suggest [Tremor] lost 4Q inventory to Upfront buys, and is being squeezed in the middle, as tech savvy advertisers shift to programmatic video buying, while less savvy advertisers/agencies continue demographic-based buying....” and that the lower 4Q 2013 revenue guidance was due in part to “advertisers continuing demo-based buys vs. [Tremor’s] performance-based placements”; and

In his report, Credit Suisse’s Stephen Ju downgraded his price target from $14 to $10 per share, highlighting that “Management noted that a faster-than-expected shift to programmatic buying in tandem with continuing advertiser preference to use demographic over the richer data set from VHA has left the company in a temporarily difficult environment.”

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63. On this news, the price of Tremor stock declined 49%, falling from its close of $9.26

per share on November 7th to close at $4.29 per share on November 8th, on unusually high trading

volume of approximately 3.5 million shares trading, or more than 26 times the average daily trading

volume over the preceding ten trading days.

CLASS ACTION ALLEGATIONS

64. Plaintiffs bring this action as a class action on behalf of a class consisting of all those

who purchased Tremor common stock pursuant and/or traceable to the Registration Statement issued

in connection with the IPO (the “Class”). Excluded from the Class are Defendants and their

families, the officers and directors and affiliates of Defendants, at all relevant times, members of

their immediate families and their legal representatives, heirs, successors or assigns and any entity in

which Defendants have or had a controlling interest.

65. The members of the Class are so numerous that joinder of all members is

impracticable. While the exact number of Class members is unknown to Plaintiffs at this time and

can only be ascertained through appropriate discovery, Plaintiffs believe that there are hundreds of

members in the proposed Class. Record owners and other members of the Class may be identified

from records maintained by Tremor or its transfer agent and may be notified of the pendency of this

action by mail, using the form of notice similar to that customarily used in securities class actions.

66. Plaintiffs’ claims are typical of the claims of the members of the Class as all members

of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is

complained of herein.

67. Plaintiffs will fairly and adequately protect the interests of the members of the Class

and has retained counsel competent and experienced in class and securities litigation.

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68. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

(a) whether Defendants violated the Securities Act;

(b) whether the Registration Statement was negligently prepared and contained

inaccurate statements of material fact and omitted material information required to be stated therein;

and

(c) to what extent the members of the Class have sustained damages and the

proper measure of damages.

69. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the

damages suffered by individual Class members may be relatively small, the expense and burden of

individual litigation make it impossible for members of the Class to individually redress the wrongs

done to them. There will be no difficulty in the management of this action as a class action.

COUNT I

For Violation of §11 of the Securities Act Against All Defendants

70. Plaintiffs incorporate ¶¶1-69 by reference.

71. This Cause of Action is brought pursuant to §11 of the Securities Act, 15 U.S.C.

§77k, on behalf of the Class, against all Defendants.

72. The Registration Statement for the IPO was inaccurate and misleading, contained

untrue statements of material facts, omitted to state other facts necessary to make the statements

made not misleading, and omitted to state material facts required to be stated therein.

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73. Defendants are strictly liable to Plaintiffs and the Class for the misstatements and

omissions.

74. None of the Defendants named herein made a reasonable investigation or possessed

reasonable grounds for the belief that the statements contained in the Registration Statement were

true and without omissions of any material facts, and were not misleading.

75. By reason of the conduct herein alleged, each Defendant violated, and/or controlled a

person who violated, §11 of the Securities Act.

76. Plaintiffs acquired Tremor common stock traceable to the IPO.

77. Plaintiffs and the Class have sustained damages. The value of Tremor common stock

has declined substantially subsequent to and due to Defendants’ violations.

78. At the time of their purchases of Tremor common stock, Plaintiffs and other members

of the Class were without knowledge of the facts concerning the wrongful conduct alleged herein

and could not have reasonably discovered those facts prior to the disclosures herein. Less than one

year has elapsed from the time that Plaintiffs discovered or reasonably could have discovered the

facts upon which this Complaint is based to the time that Plaintiffs commenced this action. Less

than three years has elapsed between the time that the securities upon which this Cause of Action is

brought were offered to the public and the time Plaintiffs commenced this action.

COUNT II

For Violation of §15 of the Securities Act Against the Company and the Individual Defendants

79. Plaintiffs incorporate ¶¶1-78 by reference.

80. This Cause of Action is brought pursuant to §15 of the Securities Act against the

Company and the Individual Defendants.

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81. The Individual Defendants each were control persons of Tremor by virtue of their

positions as directors and/or senior officers of Tremor. The Individual Defendants each had a series

of direct and/or indirect business and/or personal relationships with other directors and/or officers

and/or major shareholders of Tremor. The Company controlled the Individual Defendants and all of

Tremor’s employees.

82. The Individual Defendants each were culpable participants in the violations of §15 of

the Securities Act alleged in the Cause of Action above, based on their having signed or authorized

the signing of the Registration Statement and having otherwise participated in the process which

allowed the IPO to be successfully completed.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for relief and judgment, as follows:

A. Determining that this action is a proper class action and, and certifying Plaintiffs as

Class representatives under Rule 23 of the Federal Rules of Civil Procedure and appointing

Plaintiffs’ counsel as Class Counsel;

B. Awarding compensatory damages in favor of Plaintiffs and the other Class members

against all Defendants, jointly and severally, for all damages sustained as a result of Defendants’

wrongdoing, in an amount to be proven at trial, including interest thereon;

C. Awarding Plaintiffs and the Class their reasonable costs and expenses incurred in this

action, including counsel fees and expert fees; and

D. Such equitable/injunctive or other relief as deemed appropriate by the Court.

JURY TRIAL DEMANDED

Plaintiffs hereby demand a trial by jury.

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DATED: April 22, 2014 ROBBINS GELLER RUDMAN & DOWD LLP

SAMUEL H. RUDMAN MARY K. BLASY

/s/ Samuel H. Rudman SAMUEL H. RUDMAN

58 South Service Road, Suite 200 Melville, NY 11747 Telephone: 631/367-7100 631/367-1173 (fax) [email protected] [email protected]

HOLZER & HOLZER, LLC COREY D. HOLZER MARSHALL DEES 200 Ashford Center North, Suite 300 Atlanta, GA 30338 Telephone: 770/392-0090 770/392-0029 (fax) [email protected] [email protected]

Lead Counsel for Plaintiffs and Proposed Class Counsel

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CERTIFICATE OF SERVICE

I, Samuel H. Rudman hereby certify that on April 22, 2014, I caused a true and

correct copy of the attached:

Amended Complaint for Violation of the Federal Securities Laws

to be electronically filed with the Clerk of the Court using the CM/ECF system, which

will send notification of such public filing to all counsel registered to receive such notice.

/s/ Samuel H. Rudman SAMUEL H. RUDMAN

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