Plymouth County Retirement Association v. CrowdStrike Holdings, Inc.

CrowdStrike is a cybersecurity firm based in Austin, Texas.  CrowdStrike assured investors and its customers, among other things, that the it “maintain[ed] a regular release process to update and enhance our existing solutions,” and that its “technical staff monitors and test[ed] our software on a regular basis.” CrowdStrike also highlighted the importance of testing in order to “verify that new features are working as intended and that new additions won’t break existing functionality or infrastructure.”

On July 30, 2024, a securities class action was filed against CrowdStrike alleging that the Company misled investors during the period from November 29, 2023, through July 29, 2024 (the “Class Period.”)  The complaint alleged that, throughout the Class Period, CrowdStrike and its executives, among other things, “repeatedly touted the efficacy” of CrowdStrike’s technology while “assuring investors that CrowdStrike’s technology was ‘validated, tested, and certified.’” The complaint alleged that these assurances were false and misleading, and that CrowdStrike failed to disclose material, adverse facts about its technology and operations. The complaint alleges that CrowdStrike’s and its executives’ statements omitted, among other things, that (1) CrowdStrike’s controls and testing were deficient; (2) inadequate software testing created a substantial risk that software updates could cause major outages for a significant number of CrowdStrike’s customers; and (3) that such outages could pose substantial reputational harm and legal risk to CrowdStrike.

The complaint further alleged that the truth began to emerge on July 19, 2024, when CrowdStrike distributed an automatic update without proper testing and oversight, crippling computer systems worldwide.  The complaint alleged that, as a result, the price of CrowdStrike shares declined by $38.09 per share, or 11%. Then, on July 22, 2024, Congress called on CrowdStrike’s CEO to testify about the Company’s role in the global technology outage. The complaint alleged that, on this news, the price of CrowdStrike shares declined by an additional $41.05 per share, or 13.5%. Finally, on July 29, 2024, news outlets reported that Delta Airlines retained counsel to seek compensation from CrowdStrike following the outage.  The complaint alleged that, on this news, the price of CrowdStrike stock declined by an additional $25.16 per share, or 10%. 

On July 30, 2024, a securities class action was filed alleging that CrowdStrike and certain of its executives violated the federal securities laws.  The case has been assigned to the Honorable Robert Pitman of the United States District Court for the Western District of Texas.