BOCA RATON, Fla., July 02, 2024 (GLOBE NEWSWIRE) -- Saxena White P.A. has filed a securities fraud class action lawsuit (the “Class Action”) in the United States District Court for the Northern District of Illinois against Sprout Social, Inc. (“Sprout Social” or the “Company”) (Nasdaq: SPT) and certain of its executive officers (collectively, “Defendants”). The Class Action asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and U.S. Securities and Exchange Commission (“SEC”) Rule 10b-5 promulgated thereunder on behalf of all persons and entities that purchased or otherwise acquired Sprout Social securities between November 3, 2021 and May 2, 2024, inclusive (the “Class Period”), and were damaged thereby. The Complaint filed by Saxena White P.A. is captioned: City of Hollywood Police Officers’ Retirement System v. Sprout Social, Inc. et al., No. 24-cv-5582 (N.D. Ill.).
The Complaint expands upon the class period and allegations asserted in a related action against Sprout Social captioned Munch v. Sprout Social, Inc., No. 24-cv-03867 (N.D. Ill. May 13, 2024) (the “Munch Complaint”). Specifically, the City of Hollywood Police Officers’ Retirement System action (the “Expanded Action”) expands the pled class period, from November 2, 2023 to May 2, 2024 in the Munch Complaint to November 3, 2021 to May 2, 2024, and alleges Defendants misrepresented their ability and success in moving “upmarket” to larger enterprise customers and materially understated the impact of this move on the Company’s financial results.
Pursuant to the notice published on May 13, 2024, in connection with the filing of the Munch Complaint, as required by the Private Securities Litigation Reform Act of 1995, investors wishing to serve as Lead Plaintiff are required to file a motion for appointment as Lead Plaintiff by no later than July 12, 2024. Saxena White’s filing of the Expanded Action does not alter the deadline.
Based in Chicago, Illinois, Sprout Social is a software company that offers a centralized platform for businesses to manage social media marketing and operations. Leading up to and during the Class Period, Sprout Social changed its mix of customers, transitioning away from smaller customers on month-to-month contracts to larger, or “enterprise,” customers that would sign annual contracts. Throughout the Class Period, Defendants touted the “continued momentum” with larger customers and “our ability to kind of go upmarket.” Defendants further assured investors that as the Company moved “upmarket,” Sprout Social was “keeping the sales cycle moving quickly.”
The Expanded Action alleges that, during the Class Period, the Defendants made materially false and misleading statements and failed to disclose that: (1) Sprout Social did not have the ability to sell software to larger enterprise customers; (2) Sprout Social did not execute on its purported go-to-market strategies for enterprise customers; (3) Sprout Social was forced to overpay for Tagger Media, Inc. (“Tagger”) in order to satisfy the requirements of enterprise customers; (4) as a result of the Company’s move “upmarket,” Sprout Social was experiencing longer sales cycles and poor pipeline generation; and (5) as a result of the above, Defendants’ statements about Sprout Social’s business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.
These failures, misrepresentations, and other undisclosed issues were revealed to the market through public disclosures in 2023 and 2024. The truth was partially revealed on August 3, 2023, when Sprout Social announced the Tagger acquisition, which cost $140 million, and lowered its full-year revenue guidance. The Company explained that it acquired Tagger, a leader in influencer marketing, because influencer marketing was a routine requirement of the Company’s enterprise customer base. On this news, the price of Sprout Social stock fell 12.3%, from a closing price of $53.38 per share on August 2, 2023, to a closing price of $46.81 per share on August 4, 2023.
The truth was fully revealed to investors after the markets closed on May 2, 2024, when Sprout Social issued a press release announcing financial results for the first quarter of 2024 that included a $20 million downward revision to 2024 revenue guidance. Among other things, Defendants disclosed that Sprout Social was experiencing longer sales cycles due to the changing composition of its customer base. On this news, the price of Sprout Social stock plummeted more than 40%, from a closing price of $48.15 per share on May 2, 2024, to a closing price of $28.82 per share on May 3, 2024.
If you purchased and/or acquired Sprout Social securities during the Class Period and were damaged thereby, you are a member of the “Class” and may be able to seek appointment as lead plaintiff. If you wish to apply to be lead plaintiff, a motion on your behalf must be filed with the U.S. District Court for the Northern District of Illinois no later than July 12, 2024. The lead plaintiff is a court-appointed representative for absent members of the Class. You do not need to seek appointment as lead plaintiff to share in any Class recovery in the Class Action. If you are a Class member and there is a recovery for the Class, you can share in that recovery as an absent Class member.
You may contact Marco A. Dueñas (mduenas@saxenawhite.com), an attorney at Saxena White P.A., to discuss your rights regarding the appointment of lead plaintiff or your interest in the Class Action. You also may retain counsel of your choice to represent you in the Class Action. You may obtain a copy of the Complaint and inquire about actively joining the Class Action at www.saxenawhite.com.
Saxena White P.A., with offices in Florida, New York, California, and Delaware, is a leading national law firm focused on prosecuting securities class actions and other complex litigation on behalf of injured investors. Currently serving as lead counsel in numerous securities class actions nationwide, Saxena White has recovered billions of dollars on behalf of injured investors.
CONTACT INFORMATION
Marco A. Dueñas, Esq.
mduenas@saxenawhite.com
Saxena White P.A.
10 Bank Street, Suite 882
White Plains, New York 10606
Tel.: (914) 437-8551
Fax: (888) 631-3611
www.saxenawhite.com
