Kehoe Law Firm, P.C. Investigating Slack Technologies For Potential Breach of Fiduciary Duty Claims
Kehoe Law Firm, P.C. is making investors aware that on April 27, 2020, a shareholder derivative action was filed in United States District Court for the District of Delaware seeking to remedy alleged wrongdoing committed by certain directors and officers of Slack Technologies (“Slack Technologies” or the “Company”) (NYSE: WORK) from June 20, 2019 through the present (the “Relevant Period”) based on misleading statements and omissions made in connection with Slack Technologies’ June 2019 initial direct stock offering (“the Offering”), the subsequent failure to correct them, and insider sales made in connection with and after the Offering.
According to the complaint:
The Individual Defendants breached their fiduciary duties by personally making and/or causing the Company to make a series of materially false and misleading statements in the Offering Documents regarding the Company’s business, operations, and prospects. Specifically, the Individual Defendants willfully or recklessly made and/or caused the Company to make false and misleading statements that failed to disclose, inter alia, that: (1) the Company’s Slack App contained certain vulnerabilities that had already caused significant service outages and other disruptions in the past; (2) the Company had already failed to meet its promised 99.99% uptime guarantee during seven out of the twelve months in 2018, and would be unable to meet its 99.99% uptime guarantee in the future; (3) the Company’s SLAs [“service level agreements”] were highly punitive and unusual for the industry, and during service disruptions provided credits to users worth approximately 100 times the value of lost service, even to users who did not experience the disruptions or request service credits; (4) as a result of the foregoing, the Company’s financial results and overall prospects would be heavily impacted; and (5) the Company failed to maintain internal controls. As a result of the foregoing, the Company’s public statements were materially false and misleading.
After the Offering, the Individual Defendants failed to correct these false and misleading statements and omissions of material fact, rendering them personally liable to the Company for breaching their fiduciary duties.
Also in breach of their fiduciary duties, the Individual Defendants failed to maintain internal controls.
Furthermore, not only did six of the Individual Defendants breach their fiduciary duties by engaging in lucrative insider sales in connection with the Offering while the price of the Company’s common stock was artificially inflated due to the false and misleading statements of material fact, but three of the Individual Defendants continued to engage in insider transactions after the Offering, while the price of the Company’s stock remained artificially inflated, and before the truth was exposed. In total, the Individual Defendants collectively sold over 14.7 million shares of Company stock during the Relevant Period, obtaining proceeds of over $579 million. [Emphasis added.]