PayPal Holdings, Inc.
- Company Name
- PayPal Holdings, Inc.
- Stock Symbol
- Class Period
- February 14, 2017 to December 1, 2017
- Motion Deadline
- February 4, 2018
- Northern District of California
The complaint charges PayPal and certain of its officers with violations of the Securities Exchange Act of 1934. PayPal operates as a technology platform company that provides online payment systems through a variety of services on behalf of consumers and merchants.
On February 14, 2017, PayPal announced an agreement to purchase TIO Networks Corp. (“TIO”) for $233 million (the “TIO Acquisition”). TIO is a bill-pay management company that processed roughly $7 billion in payments on behalf of 14 million customers in 2016. On July 18, 2017, PayPal announced the completion of the TIO Acquisition.
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 TIO’s data security program was inadequate to safeguard the personal information of its users and the vulnerabilities of the program threatened the continued operation of TIO’s platform. Consequently, PayPal had overstated the benefits of the TIO Acquisition, and PayPal’s revenues derived from its TIO services were unsustainable. As a result of defendants’ false statements and/or omissions, the price of PayPal common shares was artificially inflated during the Class Period, reaching a high of more than $78 per share.
On November 10, 2017, PayPal announced it was suspending TIO operations. According to PayPal, the “suspension of services [was] a result of PayPal’s discovery of security vulnerabilities on the TIO platform and issues with TIO’s data security program that do not adhere to PayPal’s information security standards.”
Then on December 1, 2017, after the market closed, PayPal issued and update on the suspension of TIO’s operations, disclosing that “[a] review of TIO’s network has identified a potential compromise of personally identifiable information for approximately 1.6 million customers.” In addition, PayPal noted that the “ongoing investigation ha[d] identified evidence of unauthorized access to TIO’s network, including locations that stored personal information of some of TIO’s customers and customers of TIO billers.” On this news, the price of PayPal shares fell $4.33 per share, or nearly 6%, to close at $70.97 per share on the following trading day, December 4, 2017.