Pluralsight will pay $20 million to a group of early investors to settle claims the Utah tech giant misrepresented its success to investors in its early days as a public company.
The settlement ends a nearly five-year and “very hard-fought” legal battle between Pluralsight, one of Silicon Slopes’ flagship tech companies, and a group of investors responsible for public employees’ retirement funds in the Midwest, said plaintiff’s lead attorney Carol Gilden at the final settlement hearing Tuesday morning.
The class action lawsuit, first filed in 2019 and revived in 2022, claimed Pluralsight and its founding executives knowingly misled investors about their company’s success, artificially inflated stock prices and cashed out before stock prices plummeted.
The lead plaintiffs in the case are two funds responsible for managing retirement and benefit accounts for public employees in Indiana and Chicago, Illinois. Each fund bought thousands of common stock shares when Pluralsight went public in 2018, according to court documents, and lost millions of dollars as a result.
A federal judge dismissed the claims initially, but an appeals court in Denver revived many of them in 2022. The revived case also names founder and then-CEO Aaron Skonnard, and former Chief Financial Officer James Budge, as defendants.
The settlement means the case will never go to trial and is not an indication of guilt or innocence. Pluralsight declined to comment on this story, and defense attorneys did not respond to The Salt Lake Tribune’s request for comment. The company repeatedly denied the claims in court, though the 10 Circuit Appeals Court ruled in 2022 that one of Budge’s statements to investors was materially misleading.
Did Pluralsight mislead investors?
The crux of investors’ claims against Pluralsight hinges on the difference between 200 sales representatives and 250. The latter, according to court documents, is what Pluralsight executives are alleged to have told investors they’d employed, but the former was closer to the truth.
Pluralsight and its executives knew the company wasn’t profitable, the lawsuit claimed. So instead of promoting profitability, Pluralsight told investors to focus on “billings” as a metric of growth. The number of new subscriptions to the cloud-based software was growing, Pluralsight claimed, and revenue would follow shortly behind.
Such growth happened hand-in-hand with, and as a result of, executives said, the company’s growing sales force, the complaint alleges. On one call, Budge allegedly told investors that Pluralsight’s salesforce had grown from 80 to “about 250” — a testament to the company’s imminent success and profitability.
The actual number was closer to 200 sales representatives, financial disclosures would later show. That difference was enough for investors to feel like they caught Skonnard and Budge in a lie. Pluralsight was never profitable, nor was it heading toward profitability, investors claimed. And company executives knew it.
“This disclosure was so fundamentally contrary to what Pluralsight, Budge and Skonnard had led analysts and investors to believe about the sales force over the last seven months,” the complaint said.
The day after the company’s actual salesforce was disclosed, Pluralsight’s share price dropped nearly 40% — from $30.69 per share to $18.56, the lawsuit said.
Allegations of Insider trading
The lawsuit also alleged that Skonnard and Budge cashed in on their deception and intentionally withheld relevant information until after they sold their own shares in the company, at inflated rates, for millions of dollars.
“The timing of the material misrepresentation and omissions regarding the size and productivity of Pluralsight’s sales force during the Class Period was no coincidence,” the complaint said. “Rather, they existed during the precise concentrated period of time … when [executives] were selling massive quantities of their own shares of Pluralsight stock at peak prices.”
The complaint alleged that in the months leading up to June 2019, when Pluralsight’s true salesforce size was revealed, Skonnard sold $22 million in shares and earned $13.6 million, while Budge sold $15.1 million and earned $5 million.
Pluralsight refutes that the stock sales followed a customary 180-day lock-up period after an initial public stock offering. Both Skonnard and Budge retained most of their shares, defense counsel argued, and some of the sales were scheduled in advance as automatic trades.
A new chapter
The $20 million is already accounted for and waiting in an escrow account, according to court documents. There were no objections to the terms and attorneys for Pluralsight made no concluding arguments Tuesday.
In its two years on the stock exchange, Pluralsight lost roughly $164 million per year, according to public filings. That was after a meteoric rise in its early days — it was one of Utah’s first “unicorns” (a private startup that surpassed $1 billion in value).
Vista Equity Partners bought Pluralsight in 2021 for $3.8 billion and took it off the stock market. The company implemented multiple rounds of heavy layoffs over the next several years, including one in 2022 that cut roughly 20% of its workforce. Then, in May 2024, Vista Equity wrote off Pluralsight’s entire equity value and by September had sold the company to a group of lenders led by Blue Owl Capital.
Pluralsight also announced a new CEO, Erin Gajdalo in November 2024 — the third chief executive in a year. Gajaldo’s predecessor, Chris Walter, left the company in August after roughly four months at the helm. Walter had taken over for Skonnard, who stepped down in April 2024.
The flurry of changes is “positive and exciting,” Pluralsight told The Tribune in September.
Board Chairman Jeff Ray said in a news release in November that Pluralsight is in good hands with Gajaldo in charge. She worked her way up from chief delivery officer to chief operating officer to CEO in less than a year.
“Having worked with Erin over the past several months, I have witnessed her unique ability to drive our business strategy forward with exceptional operational rigor and am thrilled to have her step into the role of CEO,” Ray said.
Shannon Sollitt is a Report for America corps member covering business accountability and sustainability for The Salt Lake Tribune. Your donation to match our RFA grant helps keep her writing stories like this one; please consider making a tax-deductible gift of any amount today by clicking here.
