Leidos Holdings, Inc. (LDOS) Investigation:
The firm is investigating whether Leidos misrepresented and concealed problems with its Security Detection and Automation (SD&A) business.
In May 2020, Leidos acquired L3Harris’ SD&A business for $1 billion, claiming the deal would help Leidos achieve double-digit growth, 15% margins, and boost international sales. Leidos also represented that the cash acquired from the SD&A line was $30 million. Since this time, management has consistently stated that SD&A’s business was “ahead of our milestones” and on target.
But on Feb. 16, 2021, analyst Spruce Point published a scathing report, concluding that Leidos had “wasted” $1b on the SD&A acquisition. Spruce Point states, “We believe Leidos is potentially covering up at least $100m of fictitious sales, mischaracterizing $355 - $367m of international revenue.” Spruce Point also alleges that the company is “concealing numerous product defects from investors, notably faulty explosive detection systems at airports and borders.” Spruce Point further avers that management may be intentionally inflating certain of Leidos’ financial metrics, including operating cash flow and organic sales growth, to obscure strains from investors.
Most recently, on Feb. 23, 2021, Leidos released mixed Q4 2020 financial results and disappointing 2021 outlook, including guided revenue and EPS well below analyst consensus. Leidos also reported that the cash acquired in connection with SD&A Businesses purchase was $26 million.
The same day, Spruce Point highlighted the poor 2021 outlook and picked up on the SD&A cash acquired discrepancy, tweeting “[t]his asset is a total black box.”
On these disclosures, Leidos shares have declined sharply.
“We’re focused on investor losses and whether Leidos has misled investors about its SD&A business,” said Reed Kathrein, the Hagens Berman partner leading the investigation.
If you are a Leidos investor, click here to discuss your legal rights with Hagens Berman.
Whistleblowers: Persons with non-public information regarding Leidos should consider their options to help in the investigation or take advantage of the SEC Whistleblower program. Under the new program, whistleblowers who provide original information may receive rewards totaling up to 30 percent of any successful recovery made by the SEC. For more information, call Reed Kathrein at 844-916-0895 or email LDOS@hbsslaw.com.
About Hagens Berman
Hagens Berman is a national law firm with eight offices in eight cities around the country and over eighty attorneys. The firm represents investors, whistleblowers, workers and consumers in complex litigation. More about the firm and its successes is located at hbsslaw.com. For the latest news visit our newsroom or follow us on Twitter at @classactionlaw.
Reed Kathrein, 844-916-0895