CrowdStrike sued by shareholders over global Microsoft Windows outage

Investors sue Crowdstrike: CrowdStrike, a cybersecurity company, has been sued by shareholders who allege the company defrauded them by concealing the inadequacies in its software testing, which led to a global outage on July 19 that affected over 8 million computers.

In a proposed class action filed on Tuesday night in the Austin, Texas federal court, shareholders claimed they discovered that CrowdStrike's assurances about its technology were materially false and misleading when a flawed software update disrupted services for airlines, banks, hospitals, and emergency lines worldwide.

The lawsuit states that CrowdStrike's share price dropped by 32 per cent over the following 12 days, erasing $25 billion in market value. This period saw Chief Executive George Kurtz being called to testify before the US Congress, and Delta Air Lines (DAL.N) reportedly hiring prominent lawyer David Boies to seek damages.

The complaint references statements from a March 5 conference call where Kurtz described CrowdStrike's software as “validated, tested and certified.”

In a statement on Wednesday, Austin-based CrowdStrike responded, "We believe this case lacks merit and we will vigorously defend the company." Kurtz and Chief Financial Officer Burt Podbere are also named as defendants.

The lawsuit, led by the Plymouth County Retirement Association of Plymouth, Massachusetts, seeks unspecified damages for holders of CrowdStrike Class A shares between November 29, 2023, and July 29, 2024. Shareholders often sue companies following unexpected negative news that causes stock prices to fall, and CrowdStrike could potentially face additional lawsuits.

Delta Chief Executive Ed Bastian told CNBC on Wednesday that the outage cost his airline $500 million, including lost revenue and compensation and hotels for stranded passengers.

CrowdStrike shares closed on Wednesday down $1.69 at $231.96, having closed at $343.05 the day before the outage.

(With Reuters inputs)