A federal court has allowed a class action to proceed in which it is alleged that certain of IronNet’s officers made materially false and misleading statements to the public.

It is alleged that after IronNet became a public company in August 2021, Defendants repeatedly misled the market to believe that IronNet would achieve transformational revenue and annual recurring revenue (“ARR”) growth (the “Guidance”) in a matter of months, primarily due to large new deals that would close before the 2022 fiscal year ended on January 31, 2022. (“FY22”).1 Unbeknownst to investors— who were told that IronNet’s revenue from the public sector was not significant— Defendants materially based the Company’s Guidance on large and unprecedented, multi-million dollar public sector deals that had no realistic chance of closing in FY22. In fact, Defendants knew from the start of the Class Period that these large new deals were subject to a massive federal defense budget (the National Defense Authorization Act, or “NDAA”) that typically only passes in December.2 Moreover, as Defendant Keith Alexander3 would later explain, the passage of the NDAA was only the beginning of a very protracted process to deploy approved funds.

Despite that Defendants knew the timeline for these large new deals to contribute to FY22 was radically unrealistic, Defendants repeatedly doubled down on IronNet’s Guidance – reaffirming it on September 14, 20, 22, 28, and 30, 2021, all during the Company’s third quarter. And, with IronNet securities artificially inflated by the Company’s supposedly imminent growth, Defendant Alexander cashed out more than $5 million of his IronNet stock. On December 15, 2021, Defendants finally revealed that IronNet’s growth story was just a pipedream because the Guidance was materially based on large public sector deals that had no realistic chance of closing in FY22. Accordingly, Defendants massively slashed the Guidance, removing all large public sector deals indefinitely, and pledged to be more “transparent” and “predictable” with investors in the future. IronNet securities plunged 31%, erasing tens of millions of dollars in shareholder value overnight on this devastating news.

The gravamen of underlying securities fraud complaint is that Defendants knew, but concealed, that the FY22 revenue and ARR forecasts they provided in September 2021 were “materially based” on “large and unprecedented multi-million dollar public sector deals” that had “no realistic chance of closing in FY22” because they “were subject to a massive federal defense budget (the . . . []NDAA[]) that typically only passes in December” of each year.

IronNet shareholders who have held IronNet stock since on or before September 14, 2021, can seek corporate reforms, the return of funds spent defending litigation back to the company, and a court approved incentive award at no cost to them whatsoever.

If you would like to learn more about this matter, you are encouraged to contact us at jgrabar@grabarlaw.com, or call 267-507-6085.