In a new twist, CrowdStrike Holdings Inc. (NASDAQ: CRWD), a leading cybersecurity firm, witnessed significant insider trading activity just days before it experienced a global IT outage.
The outage has disrupted services and impacted numerous clients worldwide, including the health and air transport sectors.
In particular, according to a filing with the Securities Exchange Commission (SEC), the company’s Chief Security Officer, Shawn Henry, sold 4,000 shares of CrowdStrike stock on Monday, July 15, 2024. The transaction totaled approximately $1.485 million.
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Indeed, the sale occurred days before the July 19 outage, resulting in the CRWD stock plummeting.
This sale was executed under a prearranged 10b5-1 trading plan Henry established on December 20, 2023. Despite this significant divestment, Henry retains a notable stake in the company, holding 183,091 shares post-transaction.
Henry’s stock sale under the 10b5-1 plan is designed to prevent insider trading by allowing company insiders to set up a predetermined plan for selling stocks. This plan can protect insiders from accusations of trading based on non-public information.
Questions about the stock sale
However, the proximity of this sale to the subsequent IT outage is likely to invite scrutiny from regulators and shareholders who may question the timing and motivations behind the transaction.
Overall, the timing of Henry’s sale, which was so close to the outage that affected CrowdStrike’s operations, raises eyebrows about potential foreknowledge and the implications of such transactions.
Following these developments, CrowdStrike’s stock has been scrutinized, with the equity recording high volatility in the short term. On July 19, 2024, the company’s shares closed at $304.36, an 11% decrease from the previous day’s value.
Initially, the stock recorded losses of almost 15% in the pre-market. Indeed, the stock’s movement will likely derail CRWD’s impressive run in 2024, where the equity has rallied by over 20%.
The global IT outage that followed Henry’s stock sale caused significant service disruptions for CrowdStrike’s clients. The company’s technical teams have been restoring normalcy with executives, noting that it might take some time.
The incident resulted from an update to CrowdStrike’s cloud-based cybersecurity platform, Falcon. The update caused a malfunction in Falcon’s interactions with other systems, including Microsoft’s Windows products, effectively disabling these systems and widely used software globally.
