Cognyte Software Ltd.’s (CGNT) Ban from Using Meta’s Platforms Severely Impacts its Business Prospects
A shareholder filed a class action on behalf of all purchasers of Cognyte Software Ltd. (NASDAQ: CGNT) securities between August 30, 2021 and October 31, 2022, for violations of the Securities Exchange Act of 1934. Cognyte is security analytics software company.
According to the complaint, during the class period, defendants made misleading statements and failed to disclose that Cognyte’s business practices violated Meta Platform Inc.’s community standards and terms of service.
On December 16, 2021, Meta issued a “Threat Report,” which included the results of its “months long” investigation into the “surveillance-for-hire industry,” revealing for the first time that Cognyte (along with six private companies) regularly targeted, without their knowledge, journalists, dissidents, critics of authoritarian regimes, families of opposition, and human rights activists around the world, and collected intelligence on these people by manipulating them to reveal information and/or by compromising their devices and accounts, in violation of Facebook’s “multiple community standards and Terms of Service.” Asserting that this conduct “violated multiple Community Standards and Terms of Service,” and “given the severity of their violations,” Meta disabled Cognyte’s ability to use its platforms (removing about 100 accounts on Facebook and Instagram), shared is findings with security researchers, other platforms, and policymakers, issued Cease and Desist warnings, and alerted the nearly 50,000 individuals (across 100 countries) who were believed to be targeted to help them strengthen the security of their accounts. On this news, over the course of several days, Cognyte’s stock price fell nearly 21%.
On April 5, 2022, Cognyte released its fourth quarter 2021 financial results, revealing it was forced to modify its solutions in response to the Treat Report. Specifically, Cognyte badly missed analyst consensus estimates for non-GAAP earnings per share and sales, and significantly undershot the midpoint of its guidance range by several millions of dollars, citing “lower conversions within [its] product pipeline,” among other macroenvironmental challenges. Analysts reduced their price targets in response and the Company’s stock price fell over 31% on April 5, 2022.
Then, on June 28, 2022, Cognyte released its first quarter 2022 financial results, announcing it had badly missed analysts’ estimates across the board. On this news, Cognyte’s shares fell over 28%, to close at $4.58 per share.
What Now: Similarly situated shareholders may be eligible to participate in the class action against Cognyte. Shareholders who want to act as lead plaintiff for the class must file their papers by May 1, 2023. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. You do not have to participate in the case to be eligible for a recovery.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.