Case 1:20-cv-05646 Document 1 Filed 07/21/20 Page 1 of 26
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`MATTHEW ELLISON, Individually and on
`Behalf of All Others Similarly Situated,
`
`Case No. __________________
`
`DEMAND FOR JURY TRIAL
`
`v.
`
`Plaintiff,
`
`TUFIN SOFTWARE TECHNOLOGIES LTD.,
`REUVEN KITOV, JACK WAKILEH,
`REUVEN HARRISON, OHAD FINKELSTEIN,
`EDOUARD CUKIERMAN, YAIR SHAMIR,
`RONNI ZEHAVI, YUVAL SHACHAR, J.P.
`MORGAN SECURITIES LLC, BARCLAYS
`CAPITAL INC., JEFFERIES LLC,
`OPPENHEIMER & CO. INC., ROBERT W.
`BAIRD & CO. INCORPORATED, PIPER
`JAFFRAY & CO., STIFEL, NICOLAUS &
`COMPANY, INCORPORATED, WILLIAM
`BLAIR & COMPANY, L.L.C., and D.A.
`DAVIDSON & CO.,
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`Defendants.
`
`CLASS ACTION COMPLAINT FOR VIOLATIONS OF
`FEDERAL SECURITIES LAWS
`
`Plaintiff Matthew “Matt” Ellison (“Ellison” or “Plaintiff”), individually and on behalf of
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`all others similarly situated, by Plaintiff’s undersigned attorneys, alleges the following based upon
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`personal knowledge, as to Plaintiff and Plaintiff’s own acts, and upon information and belief, as
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`to all other matters, based on the investigation conducted by and through Plaintiff’s attorneys,
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`which included, among other things, a review of U.S. Securities and Exchange Commission
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`(“SEC”) filings made by Tufin Software Technologies Ltd. (“Tufin” or the “Company”), analyst
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`and media reports, and the Company’s press releases, among other sources. Plaintiff believes that
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`substantial additional evidentiary support will exist for the allegations set forth herein after a
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`reasonable opportunity for discovery.
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`

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`Case 1:20-cv-05646 Document 1 Filed 07/21/20 Page 2 of 26
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`NATURE AND SUMMARY OF THE ACTION
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`1.
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`On March 6, 2019, Tufin filed a registration statement with the SEC on Form F-1,
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`which, after several amendments, was declared effective on April 10, 2019 (the Form F-1, together
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`with all amendments, is referred to herein as the “April Registration Statement”). Thereafter, on
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`April 11, 2019, Tufin filed a prospectus for its initial public offering (the “IPO”) on Form 424B4,
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`which incorporated and formed part of the April Registration Statement (the “April Prospectus”
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`and collectively, with the April Registration Statement, the “IPO Offering Documents”), issuing
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`7,700,000 ordinary shares to the investing public at $14.00 per share (the “IPO Price”), for
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`anticipated gross proceeds of $107,800,000.
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`2.
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`On December 2, 2019, the Company filed a second registration statement with the
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`SEC on Form F-1, which was declared effective on December 5, 2019 (the “December
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`Registration Statement”). Thereafter, on December 5, 2019, Tufin filed a prospectus for its
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`secondary offering (the “SPO”) on Form 424B4, which incorporated and formed part of the
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`December Registration Statement (the “December Prospectus” and collectively, with the
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`December Registration Statement, “SPO Offering Documents”), issuing an additional 4,279,882
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`ordinary shares to the investing public at $17.00 per share (the “SPO Price”), for anticipated gross
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`proceeds of $72,757,994.
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`3.
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`The IPO and SPO Offering Documents (together, the “Offering Documents”) that
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`Tufin and the other Defendants (defined below) used to ultimately secure over $180 million,
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`combined, in net proceeds from investors, however, contained misleading statements in that,
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`among other things: (i) Tufin’s customer relationships and growth metrics were overstated,
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`particularly with respect to North America; (ii) Tufin’s business was deteriorating, primarily in
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`North America; and (iii) as a result, Tufin’s representations regarding its sustainable financial
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`prospects were overly optimistic.
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`2
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`4.
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`On January 8, 2020, after the market closed, Tufin released its preliminary fourth
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`quarter financial results for 2019 and announced significantly lowered financial expectations,
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`specifically: (i) it expected to report total revenue in the range of $29.5 million to $30.1 million,
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`lowered from its previous guidance of total revenue in the range of $34.0 million to $38.0 million;
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`and (ii) it now anticipated non-Generally Accepted Accounting Principles (“GAAP”) operating
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`loss in the range of $1.1 million to $2.6 million, compared to the previous guidance of non-GAAP
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`operating profit in the range of $0.0 million to $3.0 million. The primary reason given for the
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`revenue shortfall was Tufin’s “inability to close a number of transactions, primarily in North
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`America, that [the Company] anticipated would close but did not close by the end of the quarter.”
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`5.
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`Following this news, Tufin’s stock fell 24%, or $4.14 per share, and its market
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`capitalization declined nearly $145 million.
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`6.
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`This securities class action is brought on behalf of Plaintiff and all other persons or
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`entities, except for Defendants, who purchased stock in the Company’s April 2019 IPO and/or
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`December 2019 SPO pursuant and/or traceable to the misleading Offering Documents. Plaintiff
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`brings this class action under §§11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities
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`Act”) against: (i) Tufin; (ii) certain of the Company’s senior executives, directors, and agents who
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`signed the Offering Documents; and (iii) each of the investment banks that acted as underwriters
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`for the Offering (collectively, “Defendants”). The Securities Act protects investors and the capital
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`markets of the United States by preventing companies and underwriters from issuing shares to
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`investors by means of incomplete and inaccurate offering documents.
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`7.
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`Plaintiff alleges that the Offering Documents contained materially incorrect or
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`misleading statements and/or omitted material information that was required by law to be
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`disclosed. Defendants are each strictly liable for such misstatements and omissions therefrom
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`3
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`(subject only, in the case of the Individual and Underwriter Defendants (both defined below), to
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`their ability to establish a “due diligence” affirmative defense and are so liable in their capacities
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`as signers of the Offering Documents, control persons, and/or as issuers, statutory sellers, offerors,
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`and/or underwriters of the shares sold pursuant to the IPO and SPO (together, the “Offerings”)).
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`Plaintiff expressly disclaims any allegations that could be construed as alleging fraud or intentional
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`or reckless misconduct.
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`JURISDICTION AND VENUE
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`8.
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`The claims asserted herein arise under and are pursuant to §§11, 12(a)(2), and 15
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`of the Securities Act.
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`9.
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`This Court has jurisdiction over the subject matter of this action pursuant to
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`28 U.S.C. §1331 and §22 of the Securities Act (15 U.S.C. §77v).
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`10.
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`Venue is proper in this District pursuant to 28 U.S.C. §1391(b) and §22(a) of the
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`Securities Act (15 U.S.C. §77v(a)) as the alleged misstatements entered and subsequent damages
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`took place within this judicial district. Further, Defendants’ false and misleading statements and
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`omissions were disseminated in this District and Tufin’s common stock is listed on the New York
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`Stock Exchange (“NYSE”), a national securities exchange, that is located in this District.
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`11.
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`In connection with the acts, conduct, and other wrongs alleged in this Complaint,
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`Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
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`including, but not limited to, the U.S. mail, interstate telephone communications, and facilities of
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`the national securities exchange.
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`PARTIES
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`Plaintiff
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`Plaintiff Ellison purchased Tufin common stock pursuant or traceable to the
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`A.
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`12.
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`Offering Documents and was damaged thereby.
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`4
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`Case 1:20-cv-05646 Document 1 Filed 07/21/20 Page 5 of 26
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`B.
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`Defendants
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`i.
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`Tufin
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`13.
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`Defendant Tufin is an Israeli company that develops, markets, and sells software
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`and cloud-based security solutions primarily in the United States, Europe, and Asia. Tufin’s
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`common stock trades on the NYSE under the ticker symbol “TUFN.”
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`ii.
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`The Individual Defendants
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`14.
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`At all relevant times, Defendant Reuven Kitov (“Kitov”), who co-founded the
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`Company, served as Tufin’s Chief Executive Officer (“CEO”) and Chairman of the Board of
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`Directors (the “Board”). Defendant Kitov signed, or authorized the signing of, both the IPO and
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`SPO Offering Documents.
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`15.
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`At all relevant times, Defendant Jack Wakileh (“Wakileh”) served as Tufin’s Chief
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`Financial Officer (“CFO”). Defendant Wakileh signed, or authorized the signing of, both the IPO
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`and SPO Offering Documents.
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`16.
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`At all relevant times, Defendant Reuven Harrison (“Harrison”), who co-founded
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`the Company, served as Tufin’s Chief Technology Officer and as a director on the Board.
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`Defendant Harrison signed, or authorized the signing of, both the IPO and SPO Offering
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`Documents.
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`17.
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`At all relevant times, Defendant Ohad Finkelstein (“Finkelstein”) served as a
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`director on the Board. Defendant Finkelstein signed, or authorized the signing of, both the IPO
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`and SPO Offering Documents.
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`18.
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`At all relevant times, Defendant Edouard Cukierman (“Cuikerman”) served as a
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`director on the Board. Defendant Cukierman signed, or authorized the signing of, both the IPO
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`and SPO Offering Documents.
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`5
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`19.
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`At all relevant times, Defendant Yair Shamir (“Shamir”) served as a director on the
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`Board. Defendant Shamir signed, or authorized the signing of, both the IPO and SPO Offering
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`Documents.
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`20.
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`At all relevant times, Defendant Ronni Zehavi (“Zehavi”) served as a director on
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`the Board. Defendant Zehavi signed, or authorized the signing of, both the IPO and SPO Offering
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`Documents.
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`21.
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`At all relevant times, Defendant Yuval Shachar (“Shachar”) served as a director on
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`the Board. Defendant Shachar signed, or authorized the signing of, both the IPO and SPO Offering
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`Documents.
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`22.
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`Defendants named in ¶¶14-21 above are collectively referred to herein as the
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`“Individual Defendants.” The Individual Defendants each signed, or authorized the signing of, the
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`IPO and SPO Offering Documents, were director appointees of the Board at the time of the IPO
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`and SPO, solicited the investing public to purchase securities issued pursuant thereto, hired and
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`assisted the underwriters, planned and contributed to the IPO, SPO, and their respective Offering
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`Documents, and/or attended or contributed to road shows and other promotions to meet with and
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`present favorable information to potential Tufin investors, all motivated by their own and the
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`Company’s financial interests.
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`iii.
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`The Underwriter Defendants
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`23.
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`The following underwriters were also instrumental in soliciting and making the
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`securities in the IPO and SPO available to the investing public:
`
`Name
`J.P. Morgan Securities LLC
`Barclays Capital Inc.
`Jefferies LLC
`Oppenheimer & Co. Inc.
`
`# of IPO Shares
`3,041,500
`1,809,500
`1,155,000
`539,000
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`# of SPO Shares
`1,594,256
`909,475
`545,685
`288,892
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`6
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`Name
`Robert W. Baird & Co.
`Incorporated
`Piper Jaffray & Co.
`Stifel, Nicolaus & Company,
`Incorporated
`William Blair & Company,
`L.L.C.
`D.A. Davidson & Co.
`
`# of IPO Shares
`---
`385,000
`385,000
`
`385,000
`---
`
`# of SPO Shares
`256,793
`213,994
`213,994
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`213,994
`42,799
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`24.
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`Defendant J.P. Morgan Securities LLC (“J.P. Morgan”) was an underwriter of the
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`Company’s IPO and SPO, serving as a financial advisor for and assisting in the preparation and
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`dissemination of the Company’s false and misleading IPO and SPO Offering Documents. J.P.
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`Morgan acted as a book-running manager of the Offerings and as a representative of all the
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`underwriters. J.P. Morgan also participated in conducting and promoting the roadshow for the
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`IPO and SPO and paying for the expenses of the Individual Defendants who participated in the
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`roadshow, including lodging and travel, among other expenses. J.P. Morgan’s participation in the
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`solicitation of the IPO and SPO was motivated by its financial interests. Defendant J.P. Morgan
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`maintains offices at 277 Park Avenue, New York, New York 10172.
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`25.
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`Defendant Barclays Capital Inc. (“Barclays”) was an underwriter of the Company’s
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`IPO and SPO, serving as a financial advisor for and assisting in the preparation and dissemination
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`of the Company’s false and misleading IPO and SPO Offering Documents. Barclays acted as a
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`book-running manager of the Offerings and as a representative of all the underwriters. Barclays
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`also participated in conducting and promoting the roadshow for the IPO and SPO and paying for
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`the expenses of the Individual Defendants who participated in the roadshow, including lodging
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`and travel, among other expenses. Barclay’s participation in the solicitation of the IPO and SPO
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`was motivated by its financial interests. Defendant Barclays maintains offices at 745 7th Avenue,
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`New York, NY 10019.
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`7
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`Case 1:20-cv-05646 Document 1 Filed 07/21/20 Page 8 of 26
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`26.
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`Defendant Jefferies LLC (“Jefferies”) was an underwriter of the Company’s IPO
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`and SPO, serving as a financial advisor for and assisting in the preparation and dissemination of
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`the Company’s false and misleading IPO and SPO Offering Documents. Jefferies acted as a
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`book-running manager of the Offerings and as a representative of all the underwriters. Jefferies
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`also participated in conducting and promoting the roadshow for the IPO and SPO and paying for
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`the expenses of the Individual Defendants who participated in the roadshow, including lodging
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`and travel, among other expenses. Jefferies’ participation in the solicitation of the IPO and SPO
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`was motivated by its financial interests. Defendant Jefferies maintains offices at 520 Madison
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`Avenue, 10th Floor, New York, New York 10022.
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`27.
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`Defendant Oppenheimer & Co. Inc. (“Oppenheimer”) was an underwriter of the
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`Company’s IPO and SPO, serving as a financial advisor for and assisting in the preparation and
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`dissemination of the Company’s false and misleading IPO and SPO Offering Documents.
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`Oppenheimer participated in conducting and promoting the roadshow for the IPO and SPO and
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`paying for the expenses of the Individual Defendants who participated in the roadshow, including
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`lodging and travel, among other expenses. Oppenheimer’s participation in the solicitation of the
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`IPO and SPO was motivated by its financial interests. Defendant Oppenheimer maintains offices
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`at 85 Broad Street, 22nd Floor, New York, New York 10004.
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`28.
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`Defendant Robert W. Baird & Co. Incorporated (“Baird”) was an underwriter of
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`the Company’s SPO, serving as a financial advisor for and assisting in the preparation and
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`dissemination of the Company’s false and misleading SPO Offering Documents. Baird
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`participated in conducting and promoting the roadshow for the SPO and paying for the expenses
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`of the Individual Defendants who participated in the roadshow, including lodging and travel,
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`among other expenses. Baird’s participation in the solicitation of the SPO was motivated by its
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`8
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`Case 1:20-cv-05646 Document 1 Filed 07/21/20 Page 9 of 26
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`financial interests. Defendant Baird maintains offices at 1155 Avenue of the Americas, 16th Floor,
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`New York, New York 10036.
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`29.
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`Defendant Piper Jaffray & Co. (“Piper Jaffray”) was an underwriter of the
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`Company’s IPO and SPO, serving as a financial advisor for and assisting in the preparation and
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`dissemination of the Company’s false and misleading IPO and SPO Offering Documents. Piper
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`Jaffray participated in conducting and promoting the roadshow for the IPO and SPO and paying
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`for the expenses of the Individual Defendants who participated in the roadshow, including lodging
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`and travel, among other expenses. Piper Jaffray’s participation in the solicitation of the IPO and
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`SPO was motivated by its financial interests. Defendant Piper Jaffray maintains offices at 345
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`Park Avenue, #1200, New York, NY 10154.
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`30.
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`Defendant Stifel, Nicolaus & Company, Incorporated (“Stifel”) was an underwriter
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`of the Company’s IPO and SPO, serving as a financial advisor for and assisting in the preparation
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`and dissemination of the Company’s false and misleading IPO and SPO Offering Documents.
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`Stifel participated in conducting and promoting the roadshow for the IPO and SPO and paying for
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`the expenses of the Individual Defendants who participated in the roadshow, including lodging
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`and travel, among other expenses. Stifel’s participation in the solicitation of the IPO and SPO was
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`motivated by its financial interests. Defendant Stifel maintains offices at 787 7th Avenue, 11th
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`Floor, New York, New York 10019.
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`31.
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`Defendant William Blair & Company, L.L.C. (“William Blair”) was an underwriter
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`of the Company’s IPO and SPO, serving as a financial advisor for and assisting in the preparation
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`and dissemination of the Company’s false and misleading IPO and SPO Offering Documents.
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`William Blair participated in conducting and promoting the roadshow for the IPO and SPO and
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`paying for the expenses of the Individual Defendants who participated in the roadshow, including
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`9
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`Case 1:20-cv-05646 Document 1 Filed 07/21/20 Page 10 of 26
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`lodging and travel, among other expenses. William Blair’s participation in the solicitation of the
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`IPO and SPO was motivated by its financial interests. Defendant William Blair maintains offices
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`at 1166 Avenue of the Americas, 20th Floor, New York, New York 10036.
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`32.
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`Defendant D.A. Davidson & Co. (“D.A. Davidson”) was an underwriter of the
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`Company’s SPO, serving as a financial advisor for and assisting in the preparation and
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`dissemination of the Company’s false and misleading SPO Offering Documents. D.A. Davidson
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`participated in conducting and promoting the roadshow for the SPO and paying for the expenses
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`of the Individual Defendants who participated in the roadshow, including lodging and travel,
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`among other expenses. D.A. Davidson’s participation in the solicitation of the SPO was motivated
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`by its financial interests. Defendant D.A. Davidson maintains offices at 757 3rd Avenue, #1902,
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`New York, New York 10017.
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`33.
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`The Defendants named in ¶¶23-32 above are collectively referred to herein as the
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`“Underwriter Defendants.”
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`34.
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`Pursuant to the Securities Act, the Underwriter Defendants are liable for the false
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`and misleading statements in the IPO and SPO Offering Documents. The Underwriter Defendants’
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`failure to conduct adequate due diligence investigations was a substantial factor leading to the
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`harm complained of herein.
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`35.
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`The Underwriter Defendants are investment banking houses that specialize, inter
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`alia, in underwriting public offerings of securities. As the underwriters of the IPO and SPO, the
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`Underwriter Defendants earned lucrative underwriting fees as a result of their participation in the
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`IPO and SPO.
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`36.
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`In addition, the Underwriter Defendants met with potential investors and presented
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`highly favorable, but materially incorrect and/or misleading, information about the Company, its
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`10
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`business, products, plans, and financial prospects and/or omitted to disclose material information
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`required to be disclosed under the federal securities laws and applicable regulations promulgated
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`thereunder.
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`37.
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`Representatives of the Underwriter Defendants also assisted the Company and
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`Individual Defendants with planning the IPO and SPO. They further purported to conduct an
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`adequate and reasonable investigation into the business, operations, products, and plans of the
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`Company, an undertaking known as a “due diligence” investigation. During the course of their
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`“due diligence,” the Underwriter Defendants had continual access to confidential corporate
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`information concerning the Company’s business, financial condition, products, plans, and
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`prospects.
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`38.
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`In addition to having access to internal corporate documents, the Underwriter
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`Defendants and/or their agents, including their counsel, had access to the Company’s lawyers,
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`management, directors, and top executives to determine: (i) the strategy to best accomplish the
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`IPO and SPO; (ii) the terms of the IPO and SPO, including the price at which the Company’s
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`ordinary shares would be sold; (iii) the language to be used in the IPO and SPO Offering
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`Documents; (iv) what disclosures about the Company would be made in the IPO and SPO Offering
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`Documents; and (v) what responses would be made to the SEC in connection with its review of
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`the IPO and SPO Offering Documents. As a result of those constant contacts and communications
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`between the Underwriter Defendants’ representatives and the Company’s management and top
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`executives, at a minimum, the Underwriter Defendants should have known of the Company’s
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`undisclosed existing problems and plans and the material misstatements and omissions contained
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`in the IPO and SPO Offering Documents, as detailed herein.
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`11
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`39.
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`The Underwriter Defendants also demanded and obtained an agreement from Tufin
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`that the Company would indemnify and hold the Underwriter Defendants harmless from any
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`liability under the federal securities laws.
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`40.
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`Tufin, the Individual Defendants, and the Underwriter Defendants are collectively
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`referred to herein as the “Defendants.”
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`SUBSTANTIVE ALLEGATIONS
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`Factual Background
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`Founded in 2005 by Defendants Kitov and Harrison, Tufin develops, markets, and
`
`A.
`
`41.
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`sells software and cloud-based security solutions, primarily in the United States, Europe, and Asia,
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`that is committed to increasing business agility, eliminating errors from manual processes, and
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`ensuring continuous compliance through a single console.
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`42.
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`Tufin offers five products to over 2,000 customers, including approximately 16%
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`of the Global 2000, through a sales force, including field and inside sales teams, and over 140
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`active channel partners, which include distributors and resellers, as well as service delivery
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`partners that help customers deploy, configure, customize, and maintain Tufin’s products and
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`services.
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`B.
`
`The IPO and SPO Offering Documents Contained Materially Untrue and
`Misleading Statements
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`43.
`
`The Registration Statement and Prospectus used to effectuate Tufin’s April 2019
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`IPO was false and misleading in that it misled investors with respect to the Company’s North
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`American business and the fact that the Company’s customer relationships and growth metrics
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`were overstated, that Tufin’s business was deteriorating, and that, as a result, Tufin’s
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`representations regarding its sustainable financial prospects were overly optimistic, all of which
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`were known to, but concealed by, Defendants at the time of the IPO.
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`12
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`Case 1:20-cv-05646 Document 1 Filed 07/21/20 Page 13 of 26
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`44.
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`For example, for the fiscal year ended December 31, 2018, the IPO Offering
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`Documents reported revenues from the Americas of $48.27 million, comprising 56.8% of Tufin’s
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`total revenues, compared to $35.02 million, or 54.3% of total revenues, for December 31, 2017,
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`thereby indicating both significant revenue growth from the Americas relative to other geographic
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`segments and substantial growth in the America’s segment, specifically.
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`45.
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`The IPO Offering Documents also touted how “[t]he Americas accounted for the
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`majority of [Tufin’s] revenues in each of the years ended December 31, 2017 and 2018, nearly all
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`of which were generated in the United States.” And attributed increased revenues to “primarily [ ]
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`increased sales of [Tufin’s] products and services from new customers . . . and existing customers
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`. . . across all regions,” but that such growth was “most pronounced in the Americas.”
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`46.
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`In addition, the IPO Offering Documents flaunted Tufin’s purportedly strong
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`customer relationships and technology products, citing both as being core parts of the Company’s
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`growth strategy. For example, the Offering Documents boasted that “[r]evenue generated from
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`[Tufin’s] Global 2000 customers, excluding maintenance renewals, represented an average of 65%
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`of [the Company’s] total revenue over the fiscal years ended December 31, 2016 to 2018” and,
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`further, that Tufin has a “significant growth opportunity with Global 2000 customers that currently
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`lack a security policy management solution or that use a competing product that lacks automation.”
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`47.
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`The foregoing statements were materially
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`inaccurate, misleading, and/or
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`incomplete because they failed to disclose, inter alia, that the Company’s North American business
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`was suffering at the time of Tufin’s IPO. More specifically, that: (i) Tufin’s customer relationships
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`and growth metrics were overstated, primarily because of its North American business; (ii) Tufin’s
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`business was deteriorating, especially in North America; and (iii) Tufin’s representations regarding
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`its sustainable financial prospects were, as a result, overly optimistic.
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`13
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`Case 1:20-cv-05646 Document 1 Filed 07/21/20 Page 14 of 26
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`48. With the foregoing materially untrue and misleading statements in the IPO Offering
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`Documents, the IPO was successful for the Company and its executives and directors, and the
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`Underwriter Defendants, with the Company selling 7.7 million ordinary shares to Plaintiff and
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`other members of the investing public, priced at $14.00 per share, raising approximately $107.8
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`million in capital.
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`49.
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`The Registration Statement and Prospectus used to effectuate Tufin’s December
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`2019 SPO was similarly false and misleading as it continued to mislead investors with respect to
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`the Company’s North American business and the fact that the Company’s customer relationships
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`and growth metrics were overstated, that Tufin’s business was deteriorating, and that, as a result,
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`Tufin’s representations regarding its sustainable financial prospects were overly optimistic, all of
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`which were known to, but concealed by, Defendants at the time of the SPO.
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`50.
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`For example, as was stated in Tufin’s IPO Offering Documents, the SPO Offering
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`Documents claimed that Tufin’s revenues from the Americas, for the fiscal year ended December
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`31, 2018, were $48.27 million, comprising 56.8% of Tufin’s total revenues, compared to $35.02
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`million, or 54.3%, of total revenues for December 31, 2017. As a result, Defendants again
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`indicated that Tufin experienced significant revenue growth from the Americas relative to other
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`geographic segments and that Tufin experienced substantial growth in the America’s segment,
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`specifically.
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`51.
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`As well, the SPO Offering Documents repeated the assertion made in Tufin’s IPO
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`Offering Documents that “[t]he Americas accounted for the majority of our revenues in each of
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`the years ended December 31, 2017 and 2018,” adding further that the same was true “in each of
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`the nine months ended September 30, 2018 and 2019.” Moreover, the SPO Offering Documents
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`credited Tufin’s increased revenues “to increased sales of [the Company’s] products and services
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`Case 1:20-cv-05646 Document 1 Filed 07/21/20 Page 15 of 26
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`from new customers . . . and existing customers . . . across all regions,” but that such growth was
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`“most pronounced in the Americas.”
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`52.
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`The SPO Offering Documents also continued to boast about Tufin’s strong
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`customer relationships and technology products, repeating the same about how “[r]evenue
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`generated from [Tufin’s] Global 2000 customers, excluding maintenance renewals, represented an
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`average of 65% of [the Company’s] total revenue over the fiscal years ended December 31, 2016
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`to 2018” and that Tufin has a “significant growth opportunity with Global 2000 customers that
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`currently lack a security policy management solution or that use a competing product that lacks
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`automation.”
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`53.
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`The foregoing statements were materially
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`inaccurate, misleading, and/or
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`incomplete because, again, they failed to disclose, inter alia, that the Company’s North American
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`business was suffering, this time as of Tufin’s SPO. More specifically, that: (i) Tufin’s customer
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`relationships and growth metrics were overstated, primarily because of its North America business;
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`(ii) Tufin’s business was deteriorating, especially in North America; and (iii) Tufin’s
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`representations regarding its sustainable financial prospects were, as a result, overly optimistic.
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`54. With the foregoing materially untrue and misleading statements in the SPO
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`Offering Documents, the SPO was successful for the Company and its executives and directors,
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`and the Underwriter Defendants, with the Company selling nearly 4.28 million shares of Tufin
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`stock to the public at $17.00 per share, generating more than $72.7 million in gross proceeds.
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`55.
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`In addition, Item 303 of SEC Regulation S-K, 17 C.F.R. §229.303 (“Item 303”),
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`imposed an independent duty on Defendants to disclose in the IPO and SPO Offering Documents
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`any known events or uncertainties that Tufin “reasonably expects will have a material favorable
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`or unfavorable impact on the sales or revenues or income from continuing operations.” Defendants
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`Case 1:20-cv-05646 Document 1 Filed 07/21/20 Page 16 of 26
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`violated Item 303 by failing to disclose that, at the time of both the IPO and the SPO: (i) Tufin’s
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`customer relationships and growth metrics were overstated, primarily because of its North America
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`business; (ii) Tufin’s business was deteriorating, especially in North America; and (iii) Tufin’s
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`representations regarding its sustainable financial prospects were, as a result, overly optimistic.
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`These facts were likely to (and in fact did) materially and adversely affect Tufin’s future results
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`and prospects.
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`56.
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`Further, Item 503 of SEC Regulation S-K, 17 C.F.R. §229.503 (“Item 503”), also
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`imposes an independent duty on Defendants to ensure that the “Risk Factors” section of the IPO
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`and SPO Offering Documents discuss “the most significant factors that make the offering
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`speculative or risky” and that each risks factor “adequately describes the risk.” Tufin’s discussions
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`of risk factors did not mention, much less adequately describe, the actual significant risks
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`associated with the sustainability of its customer relationships and financial prospects, particularly
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`in North America. Instead, the IPO Offering Documents contained generic boilerplate
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`representations regarding seasonality in Tufin’s sales, noting that Tufin’s “sales cycle is long and
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`unpredictable, which may cause significant fluctuations in [its] quarterly results of operations,”
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`that “[t]he loss or delay of one or more large transactions in a quarter could impact [Tufin’s]
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`anticipated results of operations for that quarter and future quarters for which revenue from the
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`transaction is delayed,” and that the Company “may not be able to accurately predict or forecast
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`the timing of sales, which could cause [Tufin’s] results to vary significantly from [the Company’s]
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`expectations and the expectations of market analysts.”
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`57.
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`The true facts regarding the IPO and SPO Offering Documents began to emerge
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`after both Offerings. Indeed, in the immediate wake of the SPO, on January 9, 2020, Tufin’s stock
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`price declined as investors processed the Company’s preliminary unaudited revenue and non-
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`GAAP operating loss estimates for its fourth fiscal quarter of 2019. Notably, Tufin said that it
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`expected to report total revenue in the range of $29.5 million to $30.1 million, compared to its
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`previous guidance of total revenue in the range of $34.0 million to $38.0 million, and that Tufin
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`anticipated non-GAAP operating loss in the range of $1.1 million to $2.6 million, compared to the
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`Company’s previous guidance of non-GAAP operating profit in the range of $0.0 million to $3.0
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`million. According to Defendant Kitov, “[t]he primary reason for our revenue shortfall was our
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`inability to close a number of transactions, primarily in North America, that we anticipated would
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`close but did not close by the end of the quarter.” On this news, Tufin’s shares fells $4.14 per
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`share, or 24.04%, to close at $13.08 per share on January 9, 2020.
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`58.
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`As of the time this Complaint was filed, Tufin shar