Investigation of Carbonite Inc.

Carbonite, Inc. (CARB) Accused of Misleading Investors 

According to the derivative complaint against the company’s officers and directors for breaches of fiduciary duties, unjust enrichment, waste of corporate assets, and alleged violations of the Securities Exchange Act of 1934, in October 2018, Carbonite launched its “Server Backup VM Edition” for managed service providers. Carbonite’s officers and directors touted the new service’s ability to add “meaningfully” to Carbonite’s profits for fiscal 2019 and continuously projected positive financials throughout the relevant period. However, in reality, the Server Backup VM Edition was of poor quality and technologically flawed, receiving poor customer reviews. As a result, the Server Backup VM Edition acted as a “disruptive” factor that kept Carbonite’s sales organization from closing opportunistically on several large deals during fiscal 2019. Then, on July 25, Carbonite issued a press release announcing that it was withdrawing its Server Backup VM Edition product from the market and dramatically reduced its financial guidance for fiscal 2019 and 2020. Later that day, Carbonite’s CEO announced his resignation. On this news, the stock price of Carbonite fell more than 24% to close at $18.01, and has yet to recover.

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