US based IT services and consultancy business DXC technology is facing another class action claim following allegations that the company, which employs over 130,000 people in multiple global locations, has used its strategic redundancy programme to simply boost profits whilst leaving them unable to properly service their clients.

The class action lawsuit is being made on behalf of DXC shareholders and was lodged at the US District Court in California in September this year by well-known New York based class action litigators Brager, Eagel & Squire. The shareholders are disputing DXC’s 2017 investor prospectus in which the tech giant, formed in 2017 after a merger between CSC and a division of HP, claimed that the new company would see be able to realise $1bn of ‘synergies’ in its first 12 months due to increased economies of scale, increased administration efficiency and changes in the global workforce. This included a statement that DXC would ensure that they retain “highly motivated people with the skills necessary to serve their customers.”

The Brager, Eagel & Squire law suit alleges:

The Offering Materials' representations, financial metrics and purported risk disclosures were false and misleading because they failed to disclose that Defendants' planned "workforce optimisation" plan was, in truth, earnings management in disguise. Defendants would impose arbitrary quotas that resulted in the termination of tens of thousands of workers, selectively timed to artificially inflate reported earnings over the short term and present misleadingly inflated quarterly and yearly financial reports to boost the stock price, ahead of insider sales, including by Defendant Lawrie, who exercised stock options to gain millions in personal profit.”

At the time the claim was lodged, DXC shares were trading at $31, significantly lower than the $59 price at the time of the firms creation via merger. It is considered likely that additional shareholders may look to piggyback the lawsuit, subject to everything going to plan of course. Whilst class action claims of this type are fairly common in the US, wether they are successful or not depends on a wide range of factors.

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