Judith Almendariz filed a securities fraud class action complaint against OneSpan Inc. last Thursday, alleging that the company misled investors about its financial well-being and prospects. The Northern District of Illinois filing contends that OneSpan and its CEO and CFO overstated its revenue from customer software licenses in violation of the Securities Exchange Act.
According to the complaint, OneSpan is a Chicago-headquartered company, formerly known as VASCO Data Security International, Inc., founded in 1991. The company and its subsidiaries design, create, and market “digital solutions for identity, security, and business productivity worldwide.”
The class action complaint seeks certification of a nationwide class of stockholders who purchased OneSpan common shares between May 2018 and August of this year. The plaintiff’s contentions revolve around the company’s supposedly false and misleading statements regarding its financial disclosure compliance controls. According to the complaint, these failed when the company announced that it would be delaying its second quarter earnings release and a related Securities Exchange Commission (SEC) filing.
OneSpan attributed the delay to “prior period revenue recognition problems relating to certain software license contracts spread out … from the first quarter of 2018 to the first quarter of 2020,” resulting in “overstatements of revenue.” According to the complaint, OneSpan’s share price then fell $0.46 per share to close at $32.50 per share on August 4.
Eight days later, the company allegedly reported a trio of bad news, when it “disclosed that it would not timely file its quarterly report for the quarter ended June 30, 2020, with the SEC; reported that same quarter year-over-year revenues had declined; and withdrew its full year 2020 earnings guidance, which the Company had affirmed one quarter earlier.” Consequently, the plaintiff contends, OneSpan’s share price fell from $18.84 to $12.36 per share, a decline of 39.62%.
The plaintiff argues that the individual executives’ and OneSpan’s wrongful acts caused the “precipitous decline in the market value of the Company’s securities,” injuring the plaintiff and other putative class members. Chiefly, the plaintiff argues, the defendants failed to divulge the company’s inadequate disclosure controls and procedures regarding its financial reporting obligations.
This allegedly caused the company to overstate its revenue, and created the foreseeable chance that it would file an SEC-required financial report late. Further, the plaintiff avers, the company’s aforementioned missteps resulted in OneSpan downplaying the negative impacts of errors in its financial statements, and ultimately had a “material negative impact on the Company’s financial results and reputation.”
The plaintiff is represented by Pomerantz LLC and Holzer & Holzer, LLC.