The suit alleges that CDnow violated federal securities laws, misleading shareholders and failing to disclose it could not survive without a merger partner. The company is also accused of failing to disclose that its independent auditor reported “substantial doubts” that the company had enough cash to stay open through the fall. It seeks unspecified damages. According to the suit, statements CDnow made regarding the failed CDnow/Columbia House merger misled stockholders.
Bertelsmann's $117 million purchase of the company was announced on July 20.
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