Now, CrowdStrike's shareholders are suing it over global IT outage
What's the story
CrowdStrike, a leading cybersecurity firm, is currently facing a lawsuit filed by its shareholders.
The plaintiffs allege that the company misled them about the potential risks associated with its software testing procedures.
The class action was lodged in Austin, Texas federal court following a worldwide disruption caused by a flawed software update from CrowdStrike on July 19.
The incident had far-reaching effects on various sectors including airlines, banks, hospitals, and emergency services around the globe.
Allegations
Shareholders allege false assurances about CrowdStrike's technology
The shareholders claim that CrowdStrike provided false assurances about its technology, which they discovered only after the global outage.
They argue that the company's statements regarding its software were materially misleading.
The lawsuit specifically references a conference call on March 5, where CEO George Kurtz described CrowdStrike's software as "validated, tested and certified."
The legal action is spearheaded by the Plymouth County Retirement Association of Plymouth, Massachusetts.
Financial impact
Outage fallout: Market value and share price drop
The global outage had a significant impact on CrowdStrike's financial standing.
Over a span of 12 days following the incident, the company's share price fell by 32%, wiping out $25 billion of its market value.
This financial setback led to Kurtz being summoned before the US Congress for questioning.
The shareholders are seeking unspecified damages for holders of CrowdStrike Class A shares between November 29, 2023, and July 29, 2024.
Legal developments
Delta Air Lines seeks damages, CrowdStrike responds to lawsuit
In the aftermath of the outage, Delta Air Lines has engaged high-profile attorney David Boies to pursue damages.
The airline's CEO Edward Herman Bastian disclosed to CNBC that this incident cost his company an estimated $500 million.
This figure includes both lost revenue and expenses related to accommodating stranded passengers.
In response to the lawsuit, CrowdStrike has stated: "We believe this case lacks merit and we will vigorously defend the company."