On February 3, 2023, Saxena White filed a securities fraud class action against Atlassian Corporation, and certain of its senior executives, for violations of the Securities Exchange Act of 1934. The complaint alleges that, during the relevant time period, Atlassian made materially false and misleading statements and failed to disclose material adverse facts about the Company’s business, operations, and prospects, thus artificially inflating the Company’s stock price and causing investors to suffer substantial losses when the truth eventually emerged.
Atlassian develops and sells collaboration and project-management software that operates both on premises and in the cloud. Atlassian generates revenue from license subscription sales stemming from two primary sources: users who convert from free users to paying customers when they exceed the cap on free licenses, and existing paying customers who expand their subscriptions.
In mid-2022, the economy began to deteriorate and in response, Atlassian’s competitors lowered their revenue guidance. Atlassian, however, denied that the broader economic downturn was having a material negative impact on the Company’s business and continued to reassure investors and analysts that Atlassian’s current revenue guidance was stable. However, in reality, Atlassian overstated its financial guidance by concealing negative growth trends for its two main revenue sources, both free user conversions, and existing user expansions.
The complaint alleges that during the relevant time period, Defendants misled investors by failing to disclose: (1) that macroeconomic factors were in fact having a significant adverse impact on Atlassian’s business; (2) that growth from free to paid user conversions was slowing; and (3) that growth from existing paying-customer expansions was also slowing. As a result, Atlassian’s positive statements about the Company’s financial guidance, business, operations, and prospects during all relevant times lacked a reasonable basis and were materially false and misleading.
The truth emerged on November 3, 2022, when Atlassian finally revealed that it was reducing its revenue outlook for fiscal year 2023, citing “macro headwinds,” a decrease in free users converting to paid plans, and a slowing in the rate of paid user growth from existing customers. In response to this news, Atlassian’s stock price plummeted approximately 29% from a closing price of $174.17 per share on November 3, 2022, to a closing price of $123.73 per share on November 4, 2022.
On May 15, 2023, the Court appointed City of Hollywood Firefighters Pension Fund and Oklahoma Firefighters Pension and Retirement System as Lead Plaintiffs and Saxena White as Lead Counsel. On July 14, 2023, Lead Plaintiffs filed their amended complaint, which further detailed and refined the fraud allegations. The Defendants are expected to file a motion to dismiss the complaint and briefing for such a motion is expected to conclude by late-November 2023.
