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Leidos Holdings, Inc.

Case Details

Class Period: May 4, 2020 - February 23, 2021
Date Filed: March 04, 2021
Case Number: 1:21cv01911
Jurisdiction: New York Southern District Court
icon-casetype Case Type: Securities Case
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Case Summary

On February 16, 2021, Spruce Point Capital Management LLC (“Spruce Point”) published a research report, alleging, among other things that “Leidos is potentially covering up at least $100m of fictitious sales, mischaracterizing $355 – $367m of international revenue.” The report also alleged that the Company was “concealing numerous product defects from investors, notably faulty explosive detection systems at airports and borders.” On this news, the Company’s share price fell $2.58, or 2.4%, to close at $105.22 per share on February 16, 2021, on unusually heavy trading volume. On February 23, 2021, Leidos announced its fourth quarter and full year 2020 financial results in a press release. Therein, the Company reported $89 million revenue related to the SD&A businesses for the fourth quarter, meaning that after two full quarters, the acquisition generated only $163 million in sales (or $326 million annualized), falling well short of projected $500 million sales. The Company expected cash flow of $850 million, well below analyst estimates of $1.083 billion. On this news, the Company’s stock price fell $10.29, or 9.91%, to close at $93.51 per share on February 23, 2021. On February 24, 2021, Spruce Point highlighted that Leidos had “materially expanded” the risk disclosures in its annual report for the year ended December 31, 2020. Spruce Point tweeted: “We believe it is validating all the major points of our report.” On this news, the Company’s stock price fell $3.13, or 3.3%, to close at $90.38 per share on February 24, 2021, on unusually heavy trading volume. The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that the purported benefits of the Company’s acquisition of L3Harris’ Security Detection & Automation businesses were significantly overstated; (2) that Leidos’ products suffered from numerous product defects, including faulty explosive detection systems at airports, ports, and borders; (3) that, as a result of the foregoing, the Company’s financial results were significantly overstated; and (4) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.

Documents
Complaint