Law Street Media

Tufin Software Sued For Securities Violations

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Plaintiff Matthew Ellison filed a class action complaint on Tuesday in the Southern District of New York against Tufin Software Technologies and other related companies for securities violations regarding its allegedly false and misleading financial and securities offerings statements.

In March 2019, Tufin, a software and cloud-based solutions company, registered with the U.S. Securities and Exchange Commission (SEC). The registration was declared effective in April 2019. Later that month, Tufin filed a prospectus for its initial public offering (IPO), where it would issue “7,700,000 ordinary shares to the investing public at $14.00 per share (the “IPO Price”), for anticipated gross proceeds of $107,800,000.” A second registration was filed in December 2019, after which, Tufin filed for a second offering to issue “an additional 4,279,882 ordinary shares to the investing public at $17.00 per share (the ‘SPO Price’), for anticipated gross proceeds of $72,757,994.” As a result of these offerings, Tufin secured over $180 million from investors. The plaintiff, however, claimed that investor statements were misleading.

The alleged misleading or false statements included: “(i) Tufin’s customer relationships and growth metrics were overstated, particularly with respect to North America; (ii) Tufin’s business was deteriorating, primarily in North America; and (iii) as a result, Tufin’s representations regarding its sustainable financial prospects were overly optimistic.” 

In January, Tufin released its preliminary 2019 fourth quarter results, stating that they were lower than expected. Tufin expected between $29.5 million and $30.1 million, which was lower than its previous guidance of $34.0 million to $38.0 million. Tufin claimed that the decline was because of its “inability to close a number of transactions…that [it] anticipated would close but did not close by the end of the quarter.” As a result, Tufin’s stock “fell 24%, or $4.14 per share, and its market capitalization declined nearly $145 million.” In January, after this announcement, shares closed at $13.08, below the IPO and SPO prices. Consequently, the plaintiff proffered that his and the class’s investment in Tufin declined as a result of these shortcomings and the fallen stock price.

Moreover, the plaintiff alleged that Tufin’s securities offering documents contained false or misleading information and omitted information that it was required to disclose, which created financial statements and offering documents that were inaccurate and too optimistic. As a result, the defendants allegedly financially benefited from these misstatements. The plaintiff and the class relied on these allegedly false documents when investing in Tufin. Ellison claimed that the defendants are liable for their alleged misconduct.

The defendants are accused of violating the Securities Act for the aforementioned conduct. The plaintiff has sought to declare and certify the suit a class action and for the plaintiff to represent the class; an award for damages; an award for rescission of their claims; pre- and post-judgment interest; an award for costs and fees; and other relief as determined by the court.

The plaintiff is represented by Scott+Scott Attorneys At Law LLP.

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