Carbonite, Inc. (CARB) Accused of Misleading Investors
According to the derivative complaint against the company’s officers and directors for breach of fiduciary duties and alleged violations of the Securities Exchange Act of 1934, in October 2018, Carbonite launched its “Server Backup VM Edition” and expanded its “Data Protection Console.” Carbonite’s CEO touted the combination as “one of the single biggest development efforts in history” that would transform Carbonite into a leader in business data protection. Carbonite’s officers and directors also asserted that the Server VM Edition would be a key driver in the growth of its financial performance and reiterated these positive financial projections in a series of press releases throughout the relevant period. Despite positive projections, Carbonite’s CEO and CFO had been dumping their personal Carbonite stocks from February 2019 to July 2019 for sale proceeds of almost $1.5 million. Then, on July 25, Carbonite issued a press release announcing the resignation of its CEO and dramatically reduced its financial guidance for fiscal 2019, revealing that Carbonite’s Server Backup VM Edition was of poor quality and had earned poor reviews from customers. On this news, the stock price of Carbonite fell more than 24% to close at $18.01, and has yet to recover.