KBC Asset Management NV v. DXC Technology Co., No. 20-1718 (4th Cir. 2021)
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DXC, a publicly-traded company formed in 2017 from a merger of Computer Science and Hewlett Packard, initially met its strategic financial goals by instituting costcutting measures. In February 2018, it issued a press release announcing its continued financial success. Soon, DXC had to revise its projected revenue guidance to shareholders downward by an estimated $800 million, which it announced in November 2018. DXC’s shareholders incurred losses when its stock price subsequently fell.
Plaintiffs represent a class of shareholders who acquired DXC stock from February 8 through November 6, 2018, alleging violations of the Securities Exchange Act, 15 U.S.C. 78j(b), 78t(a), and Rule 10b-5. They claim that Defendants knew the cost-cutting measures implemented in 2018 undermined DXC’s ability to generate revenue and that this was contrary to information released to the public so that the Defendants fraudulently induced them to acquire DXC stock by making material misstatements and omissions regarding DXC's financial health and that they did so with the requisite scienter. The Fourth Circuit affirmed the dismissal of the suit. The statements issued by DXC were either forward-looking statements protected under the Private Securities Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. 78u-5, safe-harbor provision, or non-actionable puffery and that the complaint, viewed as a whole, did not contain factual allegations sufficient to give rise to the “strong inference” of scienter required by the PSLRA.
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