(CN) – Shareholders of cloud platform technology developer Pivotal Software Inc. claim in a class action that the company issued a false registration statement in the lead-up to its initial public offering.
According to the lawsuit, filed by lead plaintiff Jason Hill in California Superior Court, Pivotal sold 42 million shares under the IPO at $15 per share. Shareholders now claim the company omitted key details from offering documents, including a downswing in deferred sales and growth, according to the 14-page complaint.
The class accredits Pivotal’s diminished growth to customers who shifted away from what they call “Pivotal’s principle, yet outdated and inadequate offering because it was incompatible with the industry-standard platform.”
“With the benefits of these misrepresentations and omissions, the IPO was extremely lucrative for defendants, who raised more than $638 million in gross sales,” the class claims. “But when the truth of defendants’ misrepresentations and omissions became known, the price of Pivotal shares declined sharply.”
The company faced more hardship in 2019 as sales continued to dwindle because of “obsolescence” of their primary offering and a “competitive disadvantage” in their sales force.
Pivotal’s share price took another hit after analysts characterized the company’s first quarter of 2019 as a “train wreck” and their operating results “disastrous.”
News of Pivotal’s 2019 sales slump sent shares tumbling further. On June 5, the company’s stock closed at $10.89 per share after suffering a one day loss of 41 percent.
The class is represented by John T. Jasnoch of Scott+Scott Attorneys at Law LLP in San Diego, CA and Peretz Bronstein of Bronstein Gewirtz & Grossman LLC in New York.