After the market closed on August 3, 2023, DigitalOcean Holdings announced quarterly financial results and disclosed that the Company’s previously issued financial statements for the period ending March 31, 2023 should no longer be relied on due to accounting errors that resulted in an overstatement of the Company’s income tax expense in the quarter of approximately $18 million. As a result of the errors, the Company would be restating its first quarter 2023 financials and announced that the restatement would “also include disclosure of an identified material weakness and that our disclosure controls and procedures were not effective as of March 31, 2023.”
On this news, DigitalOcean’s stock price dropped approximately 24.8% in intraday trading the following day on August 4, 2023.
Throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants misled investors by failing to disclose that: (1) Defendants lacked the skills and experience to assess complicated tax matters and therefore did not design or maintain effective controls over the Company’s accounting for income taxes; and (2) that as a result of the foregoing, Defendants’ financial statements were inaccurate and materially misleading.
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