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By Alex Lennane
Shareholders suing FedEx have a “doomed” case, according to a recent court filing by FedEx management.
A group of shareholders last year filed a case claiming FedEx executives had failed to disclose to investors the true problems at TNT following the NotPetya cyber attack, but had continued to trade shares themselves.
However, in its response, FedEx claimed the shareholders had failed to demonstrate “a suspicious pattern of trades”, and said each director, in fact, had increased or maintained their shareholdings during the timeframe in the filing.
It added: “Most critically, the complaint fails to make any particularised allegations about the knowledge or actions of any of the eleven outside directors. That omission dooms their case.”
FedEx also argued that the allegations were “highly misleading” and omitted “numerous disclosures that informed investors about the effects of the cyber attack and FedEx’s recovery efforts”.
As an example, FedEx noted that in its quarterly report dated 20 December 2017, it had disclosed that “not all customers are shipping at pre-attack volume levels”.
The report also states: “TNT Express experienced a significant cyber attack in the first quarter of fiscal 2018 and the ongoing impact could negatively affect our results of operations and financial condition in the future, particularly if our continuing recovery efforts do not proceed as expected.”
Similarly, in its quarterly report dated 21 March 2018, FedEx says it disclosed “loss of revenue due to decreased shipments in the TNT network”, “incremental costs to restore information technology systems” and “lingering revenue impacts”.
It also reveals that there is an “exculpatory provision in FedEx’s certificate of incorporation that immunises the directors from monetary liability for breaches of the duty of care”.
The filing adds: “But FedEx never represented that it had not lost customers due to the cyber attack; to the contrary, the company disclosed that its efforts to restore the TNT customer base (and associated volumes) to pre-attack levels was ongoing.”
The case continues.
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