A securities class action has been filed against Snowflake Inc. (SNOW) on behalf of all persons who purchased Snowflake Class A common stock between September 16, 2020 through March 2, 2022. This case has been filed in the USDC – N.D.CA.
Snowflake is a cloud data platform that enables its enterprise customers to consolidate data into a single source to build data-driven applications and share data.
The Snowflake class action lawsuit alleges that defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that: (i) Snowflake had systematically oversold capacity to customers which created a misleading appearance of the demand for Snowflake’s products and services; (ii) Snowflake had provided significant discounts to its customers prior to its initial public offering (“IPO”) that temporarily boosted sales but would not be sustainable after the IPO and/or necessitate platform efficiency adjustments that negatively impacted client consumption and Snowflake’s revenue and profit margins; (iii) as a result, Snowflake’s customers were poised to roll over a material amount of unused credits (and thereby cannibalize future sales) at the end of their contracts’ terms or to refuse to renew their contracts at prior consumption levels or at all; and (iv) consequently, Snowflake’s product revenue and remaining performance obligations had been artificially inflated leading up to and during the Class Period.
On March 2, 2022, Snowflake revealed that its product revenue growth rate for fiscal 2023 was projected to be slashed to a range of 65% to 67%, far below the triple-digit growth and purportedly ongoing favorable business trends highlighted by defendants during the Class Period. On a related earnings call also held on March 2, 2022, Snowflake CFO, defendant Michael P. Scarpelli, further revealed that Snowflake customers were consuming at a reduced rate, which he blamed on “platform enhancements . . . which lowered credit consumption.” On this news, the price of Snowflake Class A common stock fell nearly 28% over several trading sessions, damaging investors.