The Complaint brings forth claims for violations of the Securities Exchange Act of 1934 against GTT Communications Inc. (“GTT” or the “Company”), and certain of its senior executives. The Complaint alleges that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired GTT common stock during the Class Period.
GTT provides cloud networking services to multinational companies. Since 2015, the Company pursued growth through “tuck-in” acquisitions. However, in February 2019, in sharp contrast to its historical strategy of acquiring smaller corporations, GTT announced that it was purchasing Interoute Communications Holdings S.A. (“Interoute”), a telecommunications company that operated Europe’s largest cloud services platform in a transformational $2.3 billion acquisition that essentially doubled GTT’s size.
Specifically, the Complaint alleges that Defendants failed to disclose that: (1) there were delays in migrating Interoute’s legacy systems and process into GTT’s client management database; (2) Interoute had made a strategic shift to focus on providing cloud services that deviated from GTT’s core cloud networking business; and (3) Interoute’s sales force was underperforming and ineffective at selling GTT’s core cloud networking services. Then, on May 8, 2019, GTT disclosed a larger than expected loss for the first quarter of 2019, blaming its poor performance on a host of issues with the Interoute integration, among other things, causing GTT’s stock price to plummet, for a two-day decline of over 25%. GTT’s stock price continued to decline over the next two months, as analysts questioned the Company’s business model, appropriateness and timeliness of its disclosures, and whether the Company utilized aggressive accounting to mask slowing revenue growth. Since the Company’s May 8 disclosures and in reaction to new information disclosed in analyst reports, GTT’s stock price has declined by more than 65% – from over $40 on May 7, 2019 to a recent low of under $13 per share – wiping out over $1.5 billion in shareholder value.
On January 7, 2020, the Court appointed the City of Atlanta Police Pension Fund and the City of Atlanta Firefighters’ Pension Fund (collectively, the “Atlanta Pension Funds”) as Lead Plaintiffs. The Court also appointed Saxena White P.A. as Lead Counsel.
On February 28, 2020, Lead Plaintiffs filed their Amended Complaint. On June 5, 2020, Defendants’ Motion to Dismiss the Amended Complaint was fully briefed. On June 22, 2020, the Court denied Defendants’ Motion to Dismiss in its entirety stating that it was “of the opinion that the Complaint state[d] a claim upon which recovery can be had.”
Lead Plaintiffs filed their Motion for Class Certification August 7, 2020. Defendants will file their Opposition to this motion on or before September 4, 2020. Lead Plaintiffs will file their Reply on or before September 25, 2020. A hearing date for this motion has been set for October 9, 2020.