Shareholders of Imperva Inc., a data security company, asked a California federal judge last month to preliminarily approve a $19 million settlement that would resolve putative class claims that the company misled investors and cost them nearly half the value of their investment while letting executives sell off their shares for millions. Imperva has agreed to pay the $19 million in settlement.
The shareholders argued that the deal is fair and reasonable, considering the risks involved with litigation. The shareholders also noted that $19 million is 8.3 percent of the total $228 million in damages that the investors sought. The memo in support of the settlement said: “[8.3 percent] is well above the median percentage of 2.5 percent for securities class action settlements in 2016.”
The parties stated they don’t know exactly how many class members are qualified to receive the relief, but they estimate there are hundreds, if not thousands, who purchased or acquired Imperva’s 24 million shares during the applicable class period. If approved, the settlement would resolve claims that the Redwood City, California-based data security company deceptively hyped the company’s competitiveness against rival International Business Machines, while executives sold off millions of their shares. The shareholders claimed the company overestimated Imperva’s competitive success, superior technology and revenue predictions for 2014.
Imperva provides data security solutions to companies through its flagship product SecureSphere. The shareholders had sued the company in April 2014 after that month’s earnings announcement came in $5 million below the lowest estimate, sending the stock falling 44 percent the next day. Before the earnings announcement, the company’s top officers and directors sold stock while shares were flying high in March, dumping nearly $26 million before the stock price dropped, the shareholders allege. Meanwhile, Imperva’s CEO Shlomo Kramer and its chief financial officer Terrence J. Schmid, who are also named Defendants, sold a portion of their holdings for nearly $12 million.
The settlement outlines how the recovery class members can receive relief based on the number of claims the investor submits, when the investor acquired and sold Imperva securities, and the number of the shares that the investor purchased or acquired and sold. A hearing on the proposed settlement is set for Oct. 11.
The shareholders are represented by Theodore J. Pintar, Douglas R. Britton and Ashley Price of Robbins Geller Rudman & Dowd LLP. The case is Shankar v. Imperva Inc. et al., (case number 4:14-cv-01680) in the U.S. District Court for the Northern District of California.