Biometrics and authentication provider OneSpan sued over alleged mismanagement and improper reporting
Pomerantz LLP has filed a suit against OneSpan alleging its biometrics, digital identity and security business violated federal securities law with misleading and “materially false” statements about its business, operations, and compliance practices.
The class action targets the company and certain of its officers over allegations that the company has inadequate disclosure controls, resulting in overstated software license revenues, which in turn caused a foreseeable delay in financial reporting. The company the downplayed the impact of errors in its statements, according to the complaint, and the unacknowledged but foreseeable material negative impact of the discrepancies rendered the company’s public statements false and misleading.
OneSpan’s Board of Directors was sent a letter by activist investor Legion Partners Asset Management earlier this month, which has demanded improved financial disclosure practices, the divestment of its hardware and electronic signatures SaaS businesses, and the removal of founder and former chairman and CEO T. Kendall Hunt from the board.
The company postponed its second quarter 2020 earnings call by a week on August 4, due to problems with software license contracts from the first quarter of fiscal 2018 to the first quarter of 2020. Following the news, OneSpan common shares fell by $0.46 per share, or 1.4 percent, to close at $32.50. A week later, the company disclosed another delay, and that its quarterly year-over-year earnings had decreased. OneSpan also withdrew its guidance for full-year 2020, despite having affirmed it in the previous quarter.
The second revelation took $12.36 out of the share price, or 39.62 percent, for an August 12, 2020 closing price of $18.84.
OneSpan stock was trading at roughly $20.50 at the time of publication.