Mercury Systems, Inc.

On July 26, 2022, Glasshouse Research published a report detailing how its “analysis on [Mercury Systems] will reveal how management has used accounting gimmicks to obfuscate true economic earnings while concealing the decay of its core company.” Specifically, the report stated that the Company’s management has “prematurely recognized revenue on significant projects boosting both revenue and earnings unsustainably” while also using recent acquisitions to conceal true earnings “with material non-GAAP exclusions,” and that the Company’s free-cash-flow is “grossly overstated as the company has been stifling its vendors to conserve cash.” On this news, Mercury Systems’ stock price fell $4.87, or 7.8%, to close at $57.26 per share on July 26, 2022, thereby injuring investors.

Then, on May 2, 2023, after the market closed, Mercury announced weak third quarter 2023 earnings and lower margins, causing the Company to cut its full year 2023 guidance. On this news, Mercury’s stock price fell $7.84, or 17.3%, to close at $37.44 per share on May 3, 2023.

Then, on June 23, 2023, Mercury announced that its CEO had abruptly resigned and that the Company’s recent strategic review of acquisition alternatives had been unsuccessful. On this news, Mercury’s stock price fell $3.37, or 9.6%, to close at $31.50 per share on June 26, 2023, thereby injuring investors further.

The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (1) Mercury’s serial acquiror strategy was not working and the company was using improper revenue recognition practices such as changing to long-term contracts to mask deteriorating organic growth; (2) the Acquisition caused POC to lose its small business accreditation, which prevented POC from winning contracts that made up a large portion of its historical business; (3) Mercury had at least twenty programs that were suffering and not performing well; and (4) as a result, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis at all relevant times.