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- Pluralsight settled a class action lawsuit for $20 million, with no admission of wrongdoing.
- The lawsuit alleged Pluralsight violated the federal securities laws by making a misleading statement about Pluralsight's sales force productivity and future billings growth.
- Settlement money will go to attorneys and a class of investors who bought stock between 2018 and 2019.
SALT LAKE CITY — Draper-based online education company Pluralsight reached a settlement agreement in a class action lawsuit Tuesday, agreeing to split $20 million among tens of thousands of investors who purchased stock in 2018 and 2019.
The suit was originally filed in the U.S. District Court for the Southern District of New York in August 2019 and transferred to the District of Utah two months later.
A handful of public employee retirement funds alleged that the company and some executives misled investors about the "size and productivity of Pluralsight's sales force," artificially inflating the stock price before and during a secondary public offering, before "disappoint(ing) financial results" and the resignation of an executive caused shares to plummet in value by almost 40%, court documents say.
The case was dismissed in March 2021, with all alleged misleading statements found to be "corporate optimism or puffery, accurate statements of historical fact, and/or protected forward-looking statements," according to court documents, or failed to show an intent to defraud investors.
The 10th Circuit appeals court, when reviewing the case, found one "actionable statement" from January 16, 2019, where plaintiffs alleged CFO James Budge told analysts and investors at a New York conference during a Q&A session "that Pluralsight's sales force had grown to 'about 250' representatives when, in fact, the company had only 200 representatives," court documents say.
The number of representatives, plaintiffs alleged, was a key indicator for investors on the growth and revenue of the business.
In March 2019, Pluralsight raised $456 million from investors with a secondary public offering, according to the U.S. Securities and Exchange Commission. CEO Aaron Skonnard sold $22.2 million in shares, Budge sold $15.1 million, and chief revenue officer Joe DiBartolomeo sold $9.7 million "at peak prices," the complaint alleges, before "dismal" financial results for the year's second quarter came out at the end of July 2019, and Di Bartolomeo announced he was resigning.
"The stock price fell $12.13 per share in a single day – a nearly 40% drop – to close at $18.56 per share on Aug. 1, 2019, causing significant financial damages," according to the complaint.
After over four years of litigation, the parties resolved the suit, with Judge David Barlow for the U.S. District Court for the District of Utah granting final approval of the $20 million settlement, a number that the prosecuting attorneys report the class members "reacted extremely positively to," the settlement filed says. "Not a single member of the class objected to any aspect of the settlement," according to the filing, which consists of "at least 25,635 potential class members."
The settlement agreement means that the parties — Pluralsight, the individual defendants, and the plaintiffs — did not find any claims to be true or false, nor did they admit to any wrongdoing or damages.
Attorneys estimated working over 7,585 hours on the case and were awarded over $4,275,000 in fees. The rest of the money will be split between class members, with an estimated average recovery of around $0.28 per affected share, depending on when the stock was purchased and sold, fees, interest and many other factors, according to prosecutors.
