- Company Name
- FedEx Corporation
- Stock Symbol
- Class Period
- September 19, 2017 to December 18, 2018
- Motion Deadline
- August 25, 2019
- Southern District of New York
The complaint charges FedEx and certain of its officers with violations of the Securities Exchange Act of 1934. FedEx is a global logistics company that ships goods to commercial and residential customers throughout the world. Traditionally, FedEx has generated a substantial majority of its revenues in the United States. In July 2016, FedEx significantly expanded its international operations through its $4.8 billion acquisition of TNT Express N.V. (“TNT”), a Netherlands-based logistics company with operations concentrated in Europe.
On June 27, 2017, TNT’s operations were crippled by a cyberattack known as NotPetya, which involved the spread of a malware virus throughout TNT’s systems (the “Cyberattack”). The timing of the attack was particularly problematic for FedEx, as TNT’s systems were paralyzed during the critical period involving the integration of TNT with the Company’s legacy European operations.
Throughout the Class Period, defendants continually assured investors about TNT’s recovery from the Cyberattack and that any negative impact from the attack was minimal. For example, defendants told investors that TNT customer volumes were being restored to pre-attack levels and that “despite the cyberattack, the customers stuck with us.” Defendants also stated that the TNT integration efforts were progressing successfully and continuously stated that FedEx was “on track” to achieve TNT synergy targets.
Notwithstanding these positive representations to the market, defendants made false and misleading statements and/or failed to disclose that: (1) TNT’s overall package volume growth was slowing, as TNT’s large customers took their business to competitors after the Cyberattack; (2) as a result of this customer attrition, TNT was experiencing an increased shift in product mix from higher margin parcel services to lower margin freight services; (3) the anticipated costs and timeframe to integrate and restore the TNT network were significantly larger and longer than disclosed; (4) FedEx was not on track to achieve TNT synergy targets; and (5) as a result of these undisclosed negative trends and cost issues, FedEx’s positive statements about TNT’s recovery from the Cyberattack, integration into FedEx’s legacy operations, customer mix, customer service levels, profitability, and prospects lacked a reasonable basis. As a result of this information being withheld from the market, the price of FedEx stock was artificially inflated to $275 per share during the Class Period.
The truth about TNT’s deteriorating business was revealed through a series of disclosures culminating on December 18, 2018. On that date, FedEx reported a large profit miss for its second fiscal quarter ended November 30, 2018. Defendants attributed the disappointing results to lower package volumes in Europe and a negative shift in TNT’s product mix to lower margin freight business following the Cyberattack – which had occurred well over a year earlier. The Company also lowered its fiscal 2019 earnings guidance and announced that its main TNT synergy target would no longer be achievable by fiscal year 2020. On this news, the price of FedEx stock dropped $22.50 per share, or 12.2%, to close at $162.51 per share on December 19, 2018.