A proposed securities class action has been filed against Sprint Corporation over alleged misstatements made by the telecommunications company in a January 2019 SEC filing.
After touting in the January filing the additions of 309,000 postpaid connections—monthly accounts not paid in advance—Sprint, the case says, later admitted that this information was “incomplete” and “not a substitute for a realistic analysis of the key factors that are most probative of Sprint’s overall competitive position and prospects.”
Sprint’s claim with regard to the “closely watched” metric of postpaid accounts was misleading to investors because, according to the case, the number was driven mostly by free lines Sprint offered to its existing customers as well as the addition of “less valuable” tablet and non-phone devices and pre- to post-paid migrations. In reality, the lawsuit alleges, the metric did not reflect an influx of new customers as Sprint represented but instead included mostly existing customers who were likely to leave “in search of better deals.”
The truth was revealed to the investing public in mid-April 2019, the case says, when Sprint filed a letter with the Federal Communications Commission (FCC) in which it admitted that its public statements concerning postpaid subscribers were “all accurate” yet “incomplete” and did not reflect Sprint’s overall business health. The letter was then referenced in a Wall Street Journal article published April 16, 2019 that reportedly diagnosed the company’s current performance as “unsustainable” without the help of a potential $27 billion merger with T-Mobile.
In response to the FCC letter, Sprint’s stock price fell nearly four percent, the case says, and then dropped another six percent following the publication of the Wall Street Journal article.
The lawsuit seeks to cover a proposed class of investors who purchased or otherwise acquired Sprint common stock between January 31, 2019 and April 15, 2019.