Class-action suit alleges Vancouver’s ZoomInfo misled investors, executives ‘dumped’ stocksSubscriber Exclusive

Investors are suing Vancouver software and data company ZoomInfo and two of its executives, alleging the company misled investors and violated securities laws.

The city of Pontiac (Mich.) Police and Fire Retirement System filed a class-action lawsuit Sept. 4 in U.S. District Court for Western Washington, seeking remedies under the Securities Exchange Act of 1934.

“In total, the price of ZoomInfo stock collapsed approximately 90 percent from its class period high, inflicting billions of dollars in financial losses and economic damages under the securities laws on class members,” the complaint states.

“Defendants, meanwhile, were able to dump billions of dollars’ worth of ZoomInfo stock at artificially inflated prices before the truth was revealed,” it alleges.

ZoomInfo spokesman Rob Morse said it’s the company’s policy not to comment on pending litigation.

The company reported $291.5 million in revenues in its second quarter of 2024, with a $24.4 million net loss, or 7 cents per diluted share. In the same quarter of 2023, ZoomInfo reported revenue of $308.6 million and net income of $38.1 million.

It saw $1.24 billion in annual revenue for 2023, an increase from the prior year.

The complaint said the company saw demand grow during the pandemic when sales calls, a major part of ZoomInfo’s business, were moved online. The company’s financial results started to decline after the pandemic eased.

Since that time, however, Chief Executive Officer Henry Schuck and former Chief Financial Officer Cameron Hyzer continued to say the company’s financials were strong.

“To prevent a mass exodus of clients, ZoomInfo utilized manipulative and coercive auto-renewal policies that required clients to notify the company of non-renewal at least 60 days before the end of the contract term — far beyond the industry norm,” the complaint states.

ZoomInfo “even resorted to threats of litigation to force clients to sign onto new contracts or to pay for services they did not want,” the complaint states.

The plaintiffs claim the retention tactics damaged customer relations to the detriment of future contract renewals. And investors were allegedly surprised when Hyzer said during an investor call the company would need to retrace the retention progress made in 2021 due to increased scrutiny by clients during contract renewal.

The company also announced in August that Hyzer was resigning this month. Graham O’Brien, vice president of financial planning and analysis, will serve as interim CFO.

A September Securities and Exchange Commission filing showed the company approved a separation agreement for Hyzer, agreeing to pay him a year’s salary – $562,000 – plus an annual performance bonus for 2024, bringing his total departure compensation to $885,610.

The company declined to comment on why Hyzer was leaving.

The complaint states the company’s stock saw a 90 percent decline from its peak $79 share price.

The plaintiffs further claim Schuck and Hyzer sold millions of dollars in ZoomInfo stock near the peak of its worth, around $77 per share. Schuck is alleged to have sold around $1.1 billion in shares, while Hyzer is alleged to have sold $35 million.

ZoomInfo trades on the Nasdaq as ZI. Its stock closed Tuesday at $10.60 per share, the same as Monday’s closing price.