Investors who bought Sprout Social (SPT) securities between September 22, 2021 and May 2, 2024 may be covered by a proposed class action alleging Sprout Social misled the market about how well its product and sales model worked for large enterprise customers. A federal judge denied the motion to dismiss on October 6, 2026; no class has been certified and there is nothing to file yet.
Allegations Only · No Settlement Yet
This article describes a class action complaint. The statements below are unproven allegations. Sprout Social, Inc. and its executives have not been found liable, there is no certified class, and nothing to claim at this time. This page is informational and is not legal advice.
What Is This About?
On October 6, 2026, Judge Jeffrey I. Cummings of the U.S. District Court for the Northern District of Illinois denied a motion to dismiss a securities class action against Sprout Social, the Chicago-based maker of social media management software. The case is Employees’ Retirement System of the City of Baltimore v. Sprout Social, Inc., No. 1:24-cv-03867. It covers everyone who bought or otherwise acquired Sprout Social securities between September 22, 2021 and May 2, 2024.The lawsuit alleges that Sprout Social told investors its product and its “inbound” sales model were well suited to large enterprise customers, and that its move upmarket was working, when that was not the case. The defendants are Sprout Social, former chief executive Justyn Howard, president and chief executive Ryan Barretto, chief financial officer Joe Del Preto and investor relations vice president Jason Rechel.
The ruling lets the case go forward. It is not a finding that the allegations are true. No class has been certified, and there is no settlement, fund or claim form.
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How the Case Got Here
The first complaint, Munch v. Sprout Social, was filed May 13, 2024, after Sprout Social’s first-quarter 2024 results. A second suit, brought by the City of Hollywood Police Officers’ Retirement System with a longer class period, followed on July 2, 2024. The court consolidated the two cases in July 2024 and in November 2024 appointed the Baltimore city employees’ pension system as lead plaintiff, with Saxena White as lead counsel and Cohen Milstein Sellers & Toll as liaison counsel.The lead plaintiff filed a 134-page consolidated complaint on January 24, 2025, which added Rechel as a defendant and set the class period that now applies. The defendants moved to dismiss it, and the October 6, 2026 opinion denied that motion.
What the Complaint Alleges
Sprout Social built its business on smaller customers who found and bought its software on their own. The complaint says that from its September 22, 2021 Investor Day onward, the company told investors this product-led, inbound model also worked for large enterprise customers, that its push upmarket was succeeding, that sales cycles stayed short, and that its partnership with Salesforce would help. It relies in part on more than a dozen former employees who served as confidential witnesses, and on an April 2023 report by an anonymous short seller.The complaint points to three stock drops. After first-quarter 2023 results on May 2, 2023, the stock fell 12.1%, from $48.32 to $42.46, and then to $38.53 the next day. After second-quarter results on August 3, 2023, when Sprout Social cut its guidance and announced a $140 million acquisition of the influencer marketing platform Tagger, it fell 12.3%, to $46.81. After first-quarter 2024 results on May 2, 2024, when the company cut its 2024 guidance, said it was “redrawing our go-to-market model,” described longer sales cycles and stopped reporting annual recurring revenue and customer counts, it fell $19.33, or 40.1%, from $48.15 to $28.82.
The complaint also alleges that Barretto and Howard sold nearly $63 million of Sprout Social stock during the class period. The claims are brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
What the Court Decided
The court denied the motion to dismiss in full, on both the Section 10(b) claim and the Section 20(a) control-person claim, and rejected a separate argument for dropping Rechel from the case. At this stage a court must accept the complaint’s factual allegations as true and ask only whether they state a claim. The opinion said the motion rested on reading the complaint in the light most favorable to the defendants rather than the plaintiff, as the law requires.Sprout Social’s most recent quarterly report says the company intends to defend the case vigorously and has not recorded a reserve for it. No public comment from the company on the ruling was found as of October 13, 2026.
What Happens Next
The court ordered the defendants to answer the complaint by October 27, 2026 and lifted the stay on discovery that applies in securities cases while a motion to dismiss is pending. By November 10, 2026, the parties must file a joint status report proposing a schedule for fact and expert discovery and giving an update on the status of settlement negotiations. An in-person status hearing is set for November 19, 2026.The class has not been certified. Members of a proposed securities class generally remain in the class without taking any action, and the lead plaintiff role has already been filled. Money would become available only through a settlement or judgment, which would come with its own court-approved notice and claim process.
Questions
Who is covered by the Sprout Social securities class action?
The proposed class is everyone who bought or otherwise acquired Sprout Social securities between September 22, 2021 and May 2, 2024, inclusive, and was damaged. Defendants and related insiders are excluded. No class has been certified.
What did the October 6, 2026 ruling decide?
Judge Jeffrey I. Cummings of the Northern District of Illinois denied the defendants’ motion to dismiss the consolidated complaint in full, on both the Section 10(b) and Section 20(a) claims. The ruling means the allegations were found sufficient to proceed, not that they are true. The court ordered the defendants to answer by October 27, 2026 and lifted the stay on discovery.
Is there still a lead plaintiff deadline in the Sprout Social case?
No. The deadline to seek appointment as lead plaintiff passed in July 2024. The court appointed the Employees’ Retirement System of the City of Baltimore as lead plaintiff, with Saxena White as lead counsel, on November 12, 2024. Members of a proposed securities class generally remain in the class without taking any action.
Is there any money available from the Sprout Social lawsuit?
No. There is no settlement, fund or claim form. Money would become available only through a settlement or judgment, which would come with its own court-approved notice and claim process.
What happens next in the Sprout Social case?
The defendants must answer the complaint by October 27, 2026. The parties must file a joint status report with a proposed discovery schedule and an update on any settlement negotiations by November 10, 2026, and an in-person status hearing is set for November 19, 2026.
Sources
- Memorandum opinion and order denying the motion to dismiss — Dkt. 65, filed October 6, 2026 (CourtListener)
- Consolidated class action complaint — Dkt. 40, filed January 24, 2025 (134 pages)
- Lead counsel’s case page — Saxena White
- Sprout Social Form 10-Q for the quarter ended June 30, 2026 — legal proceedings disclosure (SEC EDGAR)
