The class action covers investors who acquired Sprout Social securities between November 2, 2023, and May 2, 2024. Plaintiffs allege the company failed to disclose that its revenue growth metrics were misleading during a shift toward enterprise-level contracts and that internal integration issues with Tagger were creating self-induced sales headwinds. These concealed problems culminated on May 2, 2024, when the company missed its quarterly revenue targets and slashed its full-year guidance by $20 million.
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Sprout Social Faces Continued Securities Litigation After Motion Denied
A federal court has cleared the path for a securities fraud class action against Sprout Social to move forward, denying the company's motion to dismiss the case. The litigation centers on allegations that the software firm misled investors regarding its enterprise sales transition and integration hurdles following the Tagger acquisition.
Chief Financial Officer Joe Del Preto admitted during the subsequent earnings call that the firm had underestimated enterprise seasonality and suffered from internal sales execution failures. The market reaction was swift, with Sprout Social stock plunging 40.1% the following day to close at $28.82. With the stay on the case officially lifted, both parties must now submit a schedule for discovery, moving the dispute into the evidentiary phase.
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