Gainey McKenna & Egleston Announces A Class Action Lawsuit Has Been Filed Against Extreme Networks, Inc. (EXTR)

/EIN News/ -- NEW YORK, Aug. 14, 2024 (GLOBE NEWSWIRE) -- Gainey McKenna & Egleston announces that a securities class action lawsuit has been filed in the United States District Court for the Northern District of California on behalf of all persons or entities who purchased or otherwise acquired Extreme Networks, Inc. (“Extreme” or the “Company”) (NASDAQ: EXTR) securities between July 27, 2022 and January 30, 2024, inclusive (the “Class Period”). The lawsuit seeks to recover damages for the Company’s investors under the federal securities laws.

The Complaint in the lawsuit alleges that 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. The Complaint also alleges (a) Extreme was suffering from adverse client demand trends as its clients had ordered more product from Extreme than needed in the wake of the COVID-19 pandemic to avoid supply shortages and because of a lack of alternative sourcing options and thereby had cannibalized their Class Period purchasing needs; (b) that Extreme was increasingly offsetting these adverse organic demand trends with the fulfillment of backlog orders in a manner that materially exceeded the proportion represented to investors; (c) that, as a result of (a)-(b), Extreme was drawing down its backlog at a much faster rate than represented to investors; (d) that, as a result of (a)-(d), Extreme’s backlog was already decreasing and at a much quicker pace than defendants’ statements to investors that backlog would only “begin to shrink” in 4Q23 and it would be not until “fiscal ‘26 when it really goes back to normal”; (e) that, as a result of (a)-(d), Extreme’s backlog was not on track to continue increasing to $600 million; and (f) that, as a result of (a)-(e) defendants had materially misrepresented Extreme’s organic demand, revenue growth, and market share gains as the fulfillment of Extreme’s backlog masked a decline in organic demand and attendant revenues.

The Complaint further alleges that on January 25, 2023, Extreme issued a press release announcing the resignation – effective February 16, 2023 – of defendant Thomas, the Company’s CFO. The Complaint also alleges that on January 25, 2023, Extreme reported its financial results for its 2Q23 ended December 31, 2022. The Complaint alleges that in connection with reporting its 2Q23 results, Extreme revealed that, compared to 1Q23, the Company’s backlog had fallen to $542 million, its Product Book to Bill Ratio had fallen from 1.3x to 0.9x and its Service Book to Bill Ratio had fallen from 1.4x to 1.2x. The Complaint further alleges on a related earnings call, Extreme executives also shortened the timeline for backlog normalization.

According to the Complaint, as a result of this news, the price of Extreme stock dropped from $19.31 per share when the market closed on January 24, 2023 to $16.50 per share on January 25, 2023, a nearly 15% decline on abnormally heavy volume of over 9 million shares traded. The Complaint further alleges that because defendants failed to disclose the full truth and continued to make materially false and misleading statements and omissions, as detailed herein, the price of Extreme stock remained artificially inflated.

Investors who purchased or otherwise acquired shares of Extreme should contact the Firm prior to the October 15, 2024 lead plaintiff motion deadline. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.  If you wish to discuss your rights or interests regarding this class action, please contact Thomas J. McKenna, Esq. or Gregory M. Egleston, Esq. of Gainey McKenna & Egleston at (212) 983-1300, or via e-mail at tjmckenna@gme-law.com or gegleston@gme-law.com.

Please visit our website at http://www.gme-law.com for more information about the firm.