Sprout Social Faces Continued Litigation After Securities Fraud Claims Motion to Dismiss Denied
A securities fraud class action lawsuit against Sprout Social will proceed after a court denied the company's motion to dismiss the complaint. The law firm representing investors announced the decision.
Sprout Social (NASDAQ: SPT) will face continued litigation after a court denied the company's motion to dismiss claims of securities fraud, according to a notice from shareholder rights law firm Robbins LLP on October 6, 2026. The ruling lifts a stay on the case, allowing parties to proceed with discovery regarding facts and experts.
The class action lawsuit, initially filed on behalf of investors who purchased Sprout Social securities between November 2, 2023, and May 2, 2024, alleges that the company failed to disclose material information to investors. Specifically, the complaint claims Sprout Social did not adequately inform shareholders about issues related to its transition to an enterprise sales cycle, integration challenges following its acquisition of Tagger, and the resulting "self-inducing sales headwinds."
These alleged issues culminated on May 2, 2024, when Sprout Social announced its first-quarter 2024 financial results. The company missed its revenue guidance for the quarter and revised its full-year 2024 revenue forecast downward by $20 million. Sprout Social's CFO attributed the shortfall to an "underestimated magnitude of enterprise seasonality" and "self-inducing sales execution headwinds."
Following this announcement, Sprout Social's stock price fell approximately 40.1%, closing at $28.82 per share on May 3, 2024. Robbins LLP is encouraging investors who purchased Sprout Social shares prior to the alleged class period to contact the firm for more information about their rights and the ongoing litigation.