A class action lawsuit was filed against DXC Technology Company (DXC) by Levi & Korsinsky on August 2, 2024. The plaintiffs (shareholders) alleged that they bought DXC stock at artificially inflated prices between May 26, 2021, and May 16, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought DXC Technology stock during that period can click here to learn about joining the lawsuit.
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DXC Technology is an information technology services and consulting company that helps enterprises run their mission-critical systems and operations. It was formed in 2017 by the amalgamation of Computer Sciences Corporation (CSC) and the Enterprise Services business of Hewlett Packard Enterprise (HPE).
DXC Technology’s Misleading Claims
According to the lawsuit, DXC and four of its current and/or former senior officers and/or directors (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about the company’s ability to reduce certain costs from SEC filings and related material.
For instance, throughout the Class Period, DXC constantly emphasized that it was undertaking steps to reduce costs, especially those related to restructuring and TSI (transaction, separation, and integration-related) expenses.
For reference, DXC’s ex-CEO stated that the company had saved $550 million in FY21. Furthermore, the ex-CFO mentioned during the company’s Investor Day in 2021 that the company was focused on winding down restructuring and TSI expenses to improve earnings and drive free cash flows. Additionally, DXC’s then-VP stated at a conference on June 6, 2022, that the company’s financial performance and business trajectory were poised to improve for years, backed by its well-managed business.
To summarise, DXC and the Defendants constantly claimed that they were focused on reducing the company’s expenses and improving cash flows. However, subsequent events revealed that they made misleading claims about effective expense management, leading to disappointment among investors.
Plaintiffs’ Arguments
The plaintiffs maintain that the Defendants deceived investors by lying and withholding critical information about the company’s business practices and prospects during the Class Period. Importantly, the Defendants are accused of misleading investors about the company’s expense management strategies.
The information became clear in a series of events that occurred between August 3, 2022, and May 16, 2024. Importantly, investors were shocked when during the earnings call for Fiscal 2024, CEO Raul Fernandez dismissed all the efforts of the prior management at reducing costs.
Fernandez stated that “it’s clear to me that the previous restructurings did not set a real, clean, solid, fully integrated baseline for profitable growth.” He even admitted that the company was “not [a] fully functional organization.”
What’s worse, DXC announced that it would be recording an additional $250 million in expenses to achieve the restructuring and integration process that it wrongfully claimed to have implemented successfully earlier. Following the news, DXC shares fell 16.9% on May 16.
To conclude, DXC and the Defendants continued to mislead investors about the company’s expense management challenges, which continued to impact its bottom line. DXC stock has declined 42.3% over the past three years, causing massive damage to shareholder returns.
