A new complaint was filed against Xerox Holdings Corporation (XRX) by shareholder (plaintiff) Jacob Wilson on November 19, 2024, in the U.S. District Court for the Southern District of New York. The defendants in the complaint are the company, CEO Steven J. Bandrowczak, and CFO Xavier Heiss.
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The plaintiff alleges that he bought XRX stock at artificially inflated prices between January 25, 2024 and October 28, 2024 (the “Class Period”). The plaintiff is now seeking compensation for his financial losses. To learn more about the lawsuit, click here.
Xerox Holdings offers workplace technology to enterprises.
The filed complaint alleges that during the Class Period, the defendants misled Xerox investors in violation of Sections 10(b) and 20(a) of the Securities Exchange Act.
Plaintiff’s Allegations
According to the complaint, Xerox intentionally misrepresented information presented in its financial statements submitted to the U.S. SEC (Securities and Exchange Commission). In particular, the plaintiff alleges that Brandrowczak and Heiss failed to exercise proper oversight and control over XRX’s financial statements.
For instance, on January 25, 2024, Xerox released its Q4 2023 results, in which it highlighted margin expansion and reduced backlog, thanks to its “Reinvention” initiative that aimed to improve the company’s business through several initiatives, including optimizing its distribution model. The company issued an outlook for 2024 of an operating margin of at least 7.5% and a revenue decline in the range of 3% to 5% in constant currency. It explained that the lower revenue guidance was due to backlog reduction and exit from non-strategic businesses.
Further, in its Q2 2024 results announced on July 25, 2024, the company said that the “Reinvention” program caused “a short period of disruption,” reflecting the reduction in backlog and non-strategic revenue. The company stated that it expects to return to revenue growth in the second half of 2024. Xerox updated its 2024 revenue guidance to a decline of 5% to 6% in constant currency due to the impact of additional strategic actions.
However, subsequent disclosures indicated that the company allegedly didn’t properly reveal the impact of its restructuring efforts under its “Reinvention” program to the investors.
Xerox’s Misrepresentations
In contrast to the claims made by Xerox and the other defendants in the financial statements, the company allegedly misled investors about its financial prospects.
The truth came out on October 29, 2024, when Xerox announced its Q3 2024 results and revealed a 7.5% decline in its revenue and a net loss of $1.2 billion, partially due to “lower-than-expected improvements in sales force productivity” and the delay in the launch of two new products. Also, the company cut its long-term growth targets.
Overall, the reorganization of the company’s salesforce disrupted their productivity and resulted in a lower rate of sell-through of older offerings and a delay in the launch of new products, causing a decline in revenue. In reaction to the news, XRX stock declined more than 21% on October 29.
To conclude, the defendants allegedly misled investors as they didn’t disclose the true impact of the company’s restructuring initiatives. XRX stock has plunged 51% year-to-date, underperforming the broader market and causing significant losses for shareholders.
