CrowdStrike Is Sued by Shareholders over Huge Software Outage

Reuters08-01

July 31 (Reuters) - CrowdStrike has been sued by shareholders who said the cybersecurity company defrauded them by concealing how its inadequate software testing could cause the July 19 global outage that crashed more than 8 million computers.

In a proposed class action filed on Tuesday night in the Austin, Texas federal court, shareholders said they learned that CrowdStrike's assurances about its technology were materially false and misleading when a flawed software update disrupted airlines, banks, hospitals and emergency lines around the world.

They said CrowdStrike's share price fell 32% over the next 12 days, wiping out $25 billion of market value, as the outage's effects became known, Chief Executive George Kurtz was called to testify to the U.S. Congress, and Delta Air Lines reportedly hired prominent lawyer David Boies to seek damages.

The complaint cites statements including from a March 5 conference call where Kurtz characterized CrowdStrike's software as "validated, tested and certified."

In a statement on Wednesday, Austin-based CrowdStrike said: "We believe this case lacks merit and we will vigorously defend the company," Kurtz and Chief Financial Officer Burt Podbere are also defendants.

The lawsuit led by the Plymouth County Retirement Association of Plymouth, Massachusetts, seeks unspecified damages for holders of CrowdStrike Class A shares between Nov. 29, 2023 and July 29, 2024.

Shareholders often sue companies after unexpected negative news causes stock prices to fall, and CrowdStrike could face more lawsuits.

Delta Chief Executive Ed Bastian told CNBC on Wednesday that the outage cost his airline $500 million, including lost revenue and compensation and hotels for stranded fliers.

CrowdStrike shares closed on Wednesday down $1.69 at $231.96. They closed at $343.05 on the day before the outage.

The case is Plymouth County Retirement Association v CrowdStrike Inc et al, U.S. District Court, Western District of Texas, No. 24-00857.

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Comments

  • GEDILLON
    08-01
    GEDILLON
    Sold out of CRWD late last year because I saw the risk of a miss-step, weighted against it being overpriced back then. Common sence tells you this is a risky business, either from the inside through error or cyber attack from the outside. Could drop back to my target price now this is playing out. Time will tell.
    • dimpy: 

      Strong buy NVDA and AMD. Short this garbage.

    • glowzi: 

      Love watching this overvalued trashbin continue to fall.

    • bubblyx: 

      The last time it was this low was back in early December of 2023. I think someone is going to get fired.

    • happygo: 

      Hold it for long term, they will get through it. Best Cyber Security Company out there but it will take time for them to regain customer's confidence and reassurance.

    • wigglyz: 

      Take this as more of a long term investment at an insane discount imo.

  • MandyAng
    08-01
    MandyAng
    Why would they pull.the shares down by generating such news
  • Agxm
    08-01
    Agxm
    @JC888 😂shareholder sue instead.
    • JC888: 
      Hi, just read the news also... More tumble to come for CRWD... LOL
  • RUW
    08-01
    RUW
    This is great. Of course they lacked testing before pushing updates to millions of computers. Not even a basic "sanity test" (a very basic level test to make sure the changes doesn't break the system) was performed. Else it would detect such a show-stopper issue. This was a criminal level negligence by software engineers and the management of the company itself. This highlights how broken the development and deployment processes in CS. It was laughable they do cybersecurity with such a mindset. 
  • LSLi
    08-01
    LSLi
    Oh no
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