According to the Complaint, ADT Inc. ("ADT") is an electronic security system company incorporated under the laws of Delaware. ADT’s history traces back to the American District Telegraph Company, formed in 1874 as a consortium of 57 telegraph operators. After over a century in business and a series of acquisitions and mergers, ADT became a public company in September 2012. Throughout its prior tenure as a public company, ADT characterized its business as a recurring revenue business, where approximately 90% of its revenue is generated from its multi-year customer contracts, and emphasized five key value drivers for its subscription-based business
model: customer additions, costs to add a new customer (known as subscriber acquisition costs or “SAC”), average revenue per customer, costs incurred to provide service to customers, and customer tenure. In May 2016, Defendant Apollo Global, a private equity firm, acquired ADT in a leveraged buyout, after which ADT became a privately owned company and thus ceased trading publicly. Through the IPO, ADT was spun off by Apollo Global and again became a public corporation, trading publicly on the New York Stock Exchange under the ticker “ADT.”
The Complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. The Complaint alleges that specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) ADT’s Registration Statement made material misrepresentations and omissions by failing to disclose historical metrics integral to appraising ADT “key value drivers.”; (ii) ADT’s discussions of risk factors did not mention, or adequately describe the risk posed by, the then already occurring 75% increase in year-over-year losses, nor the other complete yet undisclosed materially negative 4Q and FY 2017 results and trends, nor ADT’s dependence on the Trump tax cut to meet even the extreme low end of its 2017 estimate ranges, nor the omission of historically critical metrics, nor the likely and consequent materially adverse effects on the Company’s future results, share price, and prospects; (iii) Defendants’ failure to disclose the then complete materially negative 4Q and FY 2017 results and trends, and ADT’s dependence on the Trump tax cut to meet even the extreme low end of its 2017 estimate ranges, much less the likely material effects they would have on ADT’s share price, rendered false and misleading the Registration Statement’s many references to known risks that “if” occurring “might” or “could” affect the Company; and (iv) as a result, ADT’s public statements were materially false and misleading at all relevant times.