Benefitfocus has agreed to settle a securities fraud class action for $11,000,000.

The class action arose from the secondary public offering of the common stock of Benefitfocus, commenced on or about March 1, 2019, and alleged misstatements and omissions of material fact made to investors in the Offering Documents issued in connection with the SPO. More specifically, the class action concerned Defendants’ alleged failure to disclose that prior to the SPO, non-party Mercer Health & Benefits, LLC (“Mercer Health”), allegedly one of Benefitfocus’s most important customers, was purportedly terminating its contract with the Company and would be transitioning off the Benefitfocus platform.

As a result, it is alleged that the Offering Documents were false and misleading for several reasons, including: (i) the alleged termination of the agreement with Mercer Health was falsely portrayed as an amendment in the Offering Documents; (ii) purported opportunities arising from the change in relationship with Mercer Health were allegedly non-existent; and (iii) the Company’s financial condition was allegedly worse than the Offering Documents portrayed.

Following the SPO and throughout 2019, Benefitfocus reported disappointing financial results, yet allegedly reaffirmed that “the renegotiation of the Mercer agreement will have a short-term impact on [its] 2019 revenue,” and allegedly attributed any financial strain due to the “amended” Mercer Health Agreement as anticipated “headwinds.” On March 3, 2020, Benefitfocus stated that Mercer Health was no longer a leading source of revenue in Benefitfocus’s 2020 outlook. In November 2020, investors were told that the Mercer Health Agreement had not been “amended” as allegedly portrayed in the Offering Documents but had instead been terminated in such a way that would negatively impact Benefitfocus’s financial condition throughout 2020 and beyond.

It is alleged that these undisclosed issues and the impact they had on the Company’s business caused the Company’s stock price to fall below the SPO price of $48.25 per share. As provided above, Defendants have denied, and continue to deny, Lead Plaintiff’s allegations and that the Offering Documents were materially false or misleading.

If you have held Benefitfocus shares since on or before March 1, 2019, you may be able seek corporate reforms, the return of funds expended defending litigation back to company coffers, and potentially a court approved incentive award if appropriate.

If you would like to learn more about this matter at no cost to you, contact us at jgrabar@grabarlaw.com or call 267-507-6085.