Sir John Key says ‘no merit’ to US lawsuit naming him in alleged insider trading as a director of Palo Alto Networks

Sir John Key. Photo / Greg Bowker

Former Prime Minister Sir John Key has been named in a series of “copycat” US lawsuits targeting tech giant Palo Alto Networks, which he is a director of.

A shareholder-led class action filed in April alleges executives and directors of Palo Alto misled investors about the prospects of the company’s products and services and that the company’s high growth in billings was not sustainable.

It has also been reported that shareholders have alleged directors and managers sold off a large number of shares, which the lawsuits allege amounts to insider trading.

When asked for comment Key issued a statement saying:

“Along with the other directors of Palo Alto Networks I have been named in a series of copycat lawsuits brought by three shareholders based on unproven allegations against the company in relation to our second quarter earnings update.

“Such lawsuits are not uncommon in the United States hence why this action has received very little media coverage offshore.

“In my view there is no merit to any of the claims. Palo Alto Networks has very strict share trading policies for its senior management and directors inline with SEC guidelines.

“At all times I have followed these rules. As this matter may well be before the courts I will not be making any further comments.”

In February Palo Alto reported its second quarter as revenue rose 19 per cent to US$1.96 billion ($3.2b) for the three months to December 31.

But the Silicon Valley-based cybersecurity firm’s shares plunged by as much as 19 per cent in extended Nasdaq trading after it lowered its full-year billings guidance from US$10.7-$10.8b to US$10.1-10.2b and lowered its earnings outlook.

The fall was relative; Palo Alto’s shares had more than doubled over the preceding 12 months, taking its market cap to US$115b.

A December 18, 2023, filing revealed Key had sold 2297 Palo Alto shares at US$308.74 each, implying the ex-PM would have realised US$709,106 ($1.16 million) from the sale.

The transaction said that following the sale, Key owned 14,802 shares, worth US$5.4m at Tuesday’s closing price of US$366.09.

Key was granted US$380,000 in stock awards in FY2023, according to the company’s annual report, and sat on three board committees: audit (with a US$20,000 retainer), compensation (US$25,000) and security (US$50,000).

The New Zealand taxpayer is also onboard. In a December 31, 2023 disclosure, the NZ Super Fund said it held 73,647 Palo Alto shares, worth $34.3m.

Key, who recently resigned from the board of ANZ Bank, was Prime Minister for three terms - from 2008 until his resignation in 2016.