- Company Name
- Alphabet, Inc.
- Stock Symbol
- Class Period
- April 23, 2018 to October 10, 2018
- Motion Deadline
- December 10, 2018
- Eastern District of New York
The complaint charges Alphabet and certain of its officers with violations of the Securities Exchange Act of 1934. Alphabet was incorporated in 2015 and is the parent company of Google Inc. (“Google”), among others. Alphabet, through Google, operates a social networking website called “Google+” that allows people to communicate with their family, friends and coworkers. Google+ users ostensibly have the ability to share or restrict the sharing of personal information according to their preferences by changing privacy settings.
Between 2015 and March 2018, a software glitch in the Google+ website permitted outside developers to access the personal profile data of Google+ members who had not opted to permit their data to be shared publicly. The glitch, which was discovered by Google in March 2018, exposed the data of nearly half a million Google+ users to third parties. Google’s legal and policy staff disclosed the security failure to senior executives, including Google’s CEO, defendant Sundar Pichai, and warned that disclosing the incident would likely trigger “immediate regulatory interest,” but did not disclose the data breach to Google+ users.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements regarding the Company’s business and operations. Specifically, defendants made false and misleading statements and/or failed to disclose that: (1) the Company’s security measures had failed, causing the private data of hundreds of thousands of users of Google+ to be exposed to third parties; (2) damage to the Company’s reputation and operating results and the loss of customers from this failure of Google’s security measures were imminent and inevitable; and (3) the Company’s security protections did not shield personal user data from theft and had been breached due to employee error, malfeasance, system errors or vulnerabilities. As a result this information being withheld from the market, Alphabet securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of $1,285.50 per share.
Then on October 8, 2018, citing “people briefed on the incident and documents reviewed,” The Wall Street Journal reported that Google had discovered in March 2018 that a software glitch in its Google+ social network had exposed users’ personal data to third parties, but “opted not to disclose the issue . . . in part because of fears that doing so would draw regulatory scrutiny and cause reputational damage.” Following this news, the price of Google stock fell $63.76 per share, or 5.5%, over the following two trading sessions, to close at $1,092.16 per share on October 10, 2018.