We are investigating GTT Communications, Inc. (GTT) (“GTT” or the “Company”) for potential violations of the federal securities laws.
In February 2018, GTT announced that it was purchasing Interoute Communications Holdings S.A. (“Interoute”) in a transformative acquisition for €1.9 billion ($2.3 billion) in cash. On May 8, 2019, GTT disclosed a larger-than-expected loss for the first quarter of 2019, including a sequential decline in revenues. GTT blamed its poor performance on a host of issues with the Interoute integration, including migrating legacy systems into GTT’s management database, discrepancies with Interoute’s billing systems, and a poor salesforce. In addition, GTT disclosed that shortly before the acquisition, Interoute had made a strategic shift to sell cloud services that deviated from GTT’s strategy of focusing exclusively on cloud networking. On this news, GTT’s stock price fell $7.04 per share, or 17.5%, to close at $33.25 per share on May 8, 2019.
GTT’s stock price continued to fall the following day, closing at $29.91 per share, for a two-day decline of over 25%. On May 30, 2019, GTT made a presentation at the Cowen TMT Conference 2019, in which the Company disclosed that the Interoute integration was “challenging … as we moved thousands of Interoute employees off of the Interoute systems and off of how they sold, installed, billed and moved everything into GTT systems there [were] some delays as we both went to render a new bill to the customers who are going to be getting a GTT bill instead of an Interoute bill.” On this news, GTT’s stock price fell $1.22 per share, or 4.9%, to close at $23.78 per share on May 31, 2019. On June 24, 2019, analysts at Craig-Hallum reduced their price target on GTT because “the company is in the midst of altering its DNA, which had been largely built of growth via acquisitions, a process that has been challenged by debt levels and recent integration issues.” Craig-Hallum noted that instead of continuing its roll-up strategy, GTT is now trying to “rebuild its organic growth platform” by hiring a new salesforce. On this news, GTT’s stock price fell $2.87 per share, or 12.6%, to close at $19.97 per share on June 24, 2019. Finally, on July 2, 2019, KeyBanc downgraded GTT and highlighted how internal data on GTT suggested hiring activity remained slow, indicating the increase in employee representatives necessary to achieve revenue targets might be lower than expected. KeyBanc also reported on recent leadership changes in the Americas division, noting that they were “an indication that organizational health is not great.” On this news, GTT’s stock price fell $0.50 per share, or 2.7%, to close at $18.30 per share on July 2, 2019.