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Constant Contact (CTCT) Securities Fraud Class Action Lawsuit


This lawsuit alleges that Constant Contact failed to disclose the true nature of its forecasted revenues insofar as its customer conversion rate was less than announced and that customers were opting for lower priced services.

What investors are part of this class action? The class period is currently defined as all persons who purchased Constant Contact securities between October 23, 2014 and July 23, 2015, inclusive (the "Class Period"). Constant Contact common stock trades on the NASDAQ under the ticker symbol "CTCT."

Procedural Status: This lawsuit was filed on August 7, 2015 and is captioned McGee v Constant Contact, Inc., et al. It was filed in the United States District Court for the District of Massachusetts. Its civil docket number is 1:15cv13114. The lead plaintiff deadline is October 6, 2015. 

Constant Contact originated as an email marketing platform designed for small and mid-sized organizations. The Company has grown to offer a suite of online marketing tools, and in April of 2014, launched Constant Contact Toolkit, an integrated online marketing platform meant to help small businesses secure repeat customers and attract new ones. The Company also offers tools enabling customers to initiate and monitor multi-channel marketing campaigns encompassing email, social media, events, online listings and surveys. The products are sold directly by the Company and through a nationwide network of partners.

This securities class action lawsuit alleges that Constant Contact misled investors regarding the facts underlying its revenue forecasts and performance, arguing specifically that:

  • the Company did not disclose that it was not succeeding in its efforts to achieve widespread adoption of and profitability on its expansion into multi-channel marketing tools, 
  • the Company misled investors about the true adoption rates and customer conversion and retention numbers its was registering, and
  • the Company misled investors or did not disclose that it was steering new customers toward the lowest-priced product packages.

After the market closed on April 30, 2015, Constant Contact announced earnings results for the first quarter of 2015 which did not meet expectations. It was revealed that the Company did not meet projected customer addition totals and would therefore lower its revenue guidance for 2015. As a result of the news, shares of Constant Contact dropped $7.34 per share, representing a decline of more than 21%. 

On July 23, 2015, after market close, the Company made its second quarter 2015 earnings results public, which included a weak outlook for the third quarter. Company officials cited low trial-to-conversion rates in April and May and the fact that roughly 80% of all new customers had selected the lowest-price product package available as reasons for the poor performance. According to the Company, it was a conscious positioning choice to steer new customers to those cheaper package offerings. On the news of these developments, shares of Constant Contact declined $3.35 per share, representing a drop of more than 11%. 

It is alleged that as a direct result of the wrongful acts and omissions of the defendants, the plaintiff and other class members have suffered substantial financial losses and other damages.


Current Case Status: 

This case is in the notice period. When a shareholder brings suit under certain federal securities law, generally that shareholder must give notice via a press release. This notice starts a 60 day period of time when any shareholder can investigate the underlying claims of the lawsuit and then elect to bring suit as well. At the end of this 60 day period, the court appoints one shareholder (or a group of shareholders) to prosecute the securities litigation. We will review the docket again in June and update this page as warranted.

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