|Court:||United States District Court for the Eastern District of Virginia|
|Class Period:||02/08/2018 - 11/06/2018|
|Case Leaders:||John C. Browne, Jeroen van Kwawegen, Lauren A. Ormsbee|
|Case Team:||Jesse L. Jensen|
This is a securities fraud class action on behalf of all persons who purchased DXC Technology Company (“DXC” or the “Company”) common stock between February 8, 2018 and November 6, 2018, inclusive (the “Class Period”). This action is brought against DXC, its Chief Executive Officer (“CEO”) J. Michael Lawrie (“Lawrie”), and its Chief Financial Officer (“CFO”) Paul N. Saleh (“Saleh”) for violations of the Securities Exchange Act of 1934 (“1934 Act”) and SEC Rule 10b-5, promulgated thereunder.
DXC purports to be a leader in the information technology (“IT”) services space, focusing on helping clients decrease IT infrastructure costs and advance to digital technology. DXC was formed by the merger of Computer Sciences Corporation (“CSC”) and the enterprise services business of Hewlett Packard Enterprises (“HPE”) on April 3, 2017. The merger created one of the largest IT services companies in the industry.
Plaintiffs allege that, during the Class Period, Defendants misrepresented the Company’s financial condition by issuing false and misleading statements regarding the Company’s current financial performance and outlook for fiscal year 2019 (“FY19”) in press releases, analyst conference calls and quarterly and fiscal year-end reports filed with the SEC. Specifically, during the Class Period, the Company repeatedly assured investors that it had significantly cut costs by optimizing its workforce and calibrating the mix of skills of its employees to both service existing clients and capture new business. In addition, the Company repeatedly touted the revenue growth of and prospects for its digital services platform. Accordingly, because of the combination of strong demand for its services, cost-cutting measures and workforce optimization, the Company guided investors to expect FY19 revenues of up to $22 billion.
On October 24, 2018, investors learned through independent reporting that key DXC personnel had been fired due to significant revenue declines. Rather than admit the truth, the Company reassured investors about the Company’s financial performance. The truth only became fully known on November 6, 2018, when the Company reported its second quarter 2019 financial results and disclosed that it had indeed lost big sales to significant customers, that quarterly revenues would fall short of expectations by hundreds of millions of dollars, and that the Company would reduce its FY19 revenue outlook by $800 million. Defendants also revealed that customers were scaling back upgrades in some instances, that growth in the digital space was not growing at the previously reported rates, and that the Company had changed its sales approach for two quarters and that the approach had been reversed because it was not working.
As a result of defendants’ material misrepresentations and omissions, DXC’s stock had traded at artificially inflated prices, reaching a Class Period high of more than $96.38 per share on September 21, 2018. However, after the truth was fully revealed by the November 6, 2018 disclosures, the price of DXC stock declined 13%, from a close of $72.21 per share on November 6, 2018 to a close of $63.21 per share on November 7, 2018, on high trading volume.
On March 26, 2019, KBC Asset Management NV and Arbejdsmarkedets Tillaegspension were appointed as Co-Lead Plaintiffs, and BLB&G was appointed Co-Lead Counsel for the investor class. On April 15, 2019, Plaintiffs filed a Consolidated Class Action Complaint. On May 15, 2019 Defendants filed a Motion to Dismiss and Plaintiffs filed their opposition to the Motion to Dismiss on June 17th, 2019. A hearing on the Motion to Dismiss was held on July 26, 2019. On June 2, 2020, the Court granted the motion to dismiss and entered judgment for Defendants. On July 1, 2020, Plaintiffs filed a Notice of Appeal of the District Court’s decision to the Fourth Circuit Court of Appeals. We timely filed our opening brief in support of our appeal on September 11, 2020.
On November 12, 2020, Defendants timely filed their opposition brief. On November 17, 2020, we filed an unopposed request for a 10-day extension on our reply brief, which the Fourth Circuit granted that day. In accordance with this deadline, on December 14, 2020, we timely filed our reply brief, and the appeal is now fully briefed. The Fourth Circuit has not yet indicated whether it will hear oral argument.
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