Forescout Technologies, Inc. Class Action Lawsuit
- Company Name
- Forescout Technologies, Inc.
- Stock Symbol
- Class Period
- February 6, 2020 to May 15, 2020
- Northern District of California
The Forescout Technologies, Inc. class action lawsuit charges Forescout and certain of its officers with violations of the Securities Exchange Act of 1934 and seeks to represent purchasers of Forescout common stock between February 6, 2020 and May 15, 2020, inclusive (the “Class Period”). The Forescout class action lawsuit was commenced on June 10, 2020 in the Northern District of California and is captioned The Arbitrage Fund v. Forescout Technologies, Inc., No. 20-cv-03819.
Forescout is a computer and network security company. In recent years Forescout has been focused on expanding its business internationally, especially in the Asia Pacific and Japan regions. On October 28, 2019, Forescout retained Morgan Stanley and established a Strategic Committee to oversee a review of strategic alternatives. On February 5, 2020, Forescout accepted Advent International Corporation’s acquisition proposal at a price of $33.00 per share in cash (the “Transaction”).
The Forescout class action lawsuit alleges that defendants made false and/or misleading statements and/or failed to disclose that: (i) Forescout’s business was experiencing a significant decline; (ii) Advent was concerned about Forescout’s recent financial performance; (iii) Forescout was not meeting its obligations under the merger agreement for the Transaction; and (iv) as a result of these factors, there was a significant risk Forescout’s planned Transaction with Advent would not close.
During the sales process, the COVID-19 virus emerged and began affecting businesses worldwide. Beginning by at least February 6, 2020, when Forescout announced the merger agreement for the Transaction, defendants were aware of the significant and disproportionate impact COVID-19 was having on Forescout’s business, but failed to disclose it to investors. Indeed, by March 24, 2020, when Forescout filed its Definitive Proxy Statement regarding the Transaction, Forescout and its senior officers knew that COVID-19 was severely and disproportionately impacting Forescout’s business, that Forescout was not complying with certain of the merger agreement requirements, that Advent had expressed concerns about Forescout’s financial performance, and that there was a significant risk the Transaction would not close. In addition, Forescout was aware that its fourth quarter 2019 revenues had been inflated through an abnormal transaction with one of its largest resale customers, Merlin International Inc., which a whistleblower had disclosed to Advent was the result of an alleged “channel stuffing scheme” in the fourth quarter of 2019. Because of these factors, Forescout knew that the consummation of the Transaction was exceptionally risky.
Ultimately, on May 18, 2020, Forescout announced that, on May 15, 2020, it had received notice from Advent that it “would not be proceeding to consummate the acquisition of Forescout.” On this news, Forescout’s stock price fell by more than 23%.
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