David Michaelson filed a class-action complaint against Tufin Software Technologies and some of its senior executives and directors in the Southern District of New York on Monday for securities violations based on an investigation conducted by the plaintiff’s attorneys. The investigation allegedly revealed that Tufin made various misleading statements or omissions of legally required disclosures in documentation for its public offerings.
Tufin, a software and cloud-based security solutions company, filed various documents with the Securities and Exchange Commission (SEC) in 2019. Tufin’s prospectus for its initial public offering (IPO) called for the issuing of 7,700,000 ordinary shares to the public at $14.00 per share, which would generate $107,800,000 in funds for Tufin. For its second public offering, Tufin filed a prospectus that called for an additional 4,279,882 ordinary shares at $17.00 per share, which would generate $72,757,994. In total, Tufin generated more than $180 million from its IPO and SPO.
The plaintiff averred that Tufin’s documents contained numerous misleading statements, specifically: “Tufin’s customer relationships and growth metrics were overstated, particularly with respect to North America”; “Tufin’s business was deteriorating, primarily in North America”; and consequently, “Tufin’s representation regarding its sustainable financial prospects were overly optimistic.” This allegedly “overly optimistic” representation of the investment opportunity and Tufin’s position informed the plaintiff’s decision to invest in Tufin, along with others in the putative clase. A similar suit was filed against Tufin in July.
After the market closed on January 8, 2020, Tufin released its preliminary 2019 fourth quarter results. Tufin had previously expected a total revenue of between $34.0 million and $38.0 million, but these expectations were lowered in the report to $29.5 million and $30.1 million. The company was also expecting to lose between $1.1 and $2.6 million, when it reported expectations to grow by up to $3.0 million.
The plaintiff stated that “[t]he primary reason given for the revenue shortfall was Tufin’s ‘inability to close a number of transactions, primarily in North America, that [the Company] anticipated would close but did not close by the end of the quarter.’” After this news, Tufin’s stock fell by 24 percent, the equivalent of $4.14 per share; its capitalization in the market was reduced to $145 million. The plaintiff claimed that he and others were misled by Tufin to invest in a deteriorating business. The plaintiff provided multiple examples of Tufin’s representations of its position in the Americas, showing it accounted for a large portion of its revenue and that it helped increase Tufin’s growth, but the plaintiff proffered that this was untrue.
The putative class includes those who purchased Tufin stock in its April 2019 IPO and/or its December 2019 SPO, which can be traced to the purportedly misleading documents. The suit is brought under Sections 11 and 15 of the Securities Act of 1933. The plaintiff has sought an award for damages, costs, and fees; pre and post judgment interest; and other relief. The plaintiff is represented by Pomerantz LLP and Bronstein, Gewirtz & Grossman, LLC.