(Photo by STEFANO RELLANDINI/AFP via Getty Images)
Following last week's update disaster, CrowdStrike shareholders are suing the cybersecurity company over its plummeting stock price.
The Plymouth County Retirement Association, which bought shares in CrowdStrike, filed a securities class-action lawsuit against the Texas-based cybersecurity vendor, demanding it pay damages for the stock price losses.
Prior to last Friday’s outage, CrowdStrike’s stock had been trading at historic highs, around $390 to $350. But the price has since fallen to $232 per share. The Plymouth County Retirement Association now wants compensation over claims CrowdStrike deceived shareholders about its Falcon security software, which accidentally caused the outage through a faulty update that bricked millions of PCs and servers.
CrowdStrike "repeatedly touted the efficacy of the Falcon platform while assuring investors that CrowdStrike’s technology was ‘validated, tested, and certified.’ The Complaint alleges that these statements were false and misleading,” the retirement association says.
The lawsuit faults CrowdStrike for failing to disclose the “deficient controls” it was using to test the company’s software updates before rolling them out to customers. The ensuing outage also led to “substantial reputational harm and legal risk to CrowdStrike,” which has since been reflected in the company’s declining stock price.
“As a result of these materially false and misleading statements and omissions, CrowdStrike stock traded at artificially high prices,” the legal complaint says. The retirement association is filing the lawsuit on behalf of all shareholders who owned CrowdStrike stock between Nov. 29, 2023, and July 29, 2024.
“As of May 30, 2024, there were approximately 231 million shares of CrowdStrike Class A common stock outstanding, owned by thousands of investors,” the lawsuit noted.
CrowdStrike told PCMag: “We believe this case lacks merit and we will vigorously defend the company.” One reason might be because CrowdStrike had told investors that “improper deployment or configuration” of its solutions and service interruptions were a risk factor to the company’s business.
Still, the lawsuit probably won’t be the last CrowdStrike faces. Delta Air Lines has reportedly hired a lawyer to seek compensation from CrowdStrike for the outage, which forced the airline to delay and cancel thousands of flights last week. In the meantime, CrowdStrike says it’s restored over 99% of the affected computers hit by the outage.