(Bloomberg) — Last fall, George Kurtz, the CEO of CrowdStrike Holdings, Inc., gave investors a quarterly financial update that sent shares soaring. Among the details Kurtz highlighted was a major deal to sell cybersecurity tools for use by the U.S. government. markets closed on Nov. 28, 2023. Kurtz was referring to a $32 million order from Carahsoft Technology Corp., which acts as an intermediary between technology companies and government agencies, that arrived on the last day of CrowdStrike’s fiscal third quarter. According to documents from both companies, it was for identity threat protection software intended for the US Internal Revenue Service.
But the IRS never purchased the software, according to records reviewed by Bloomberg News and people with knowledge of the situation.
Still, according to the cybersecurity company, Carahsoft paid the $32 million to CrowdStrike on time. When Bloomberg News reached out for comment, both companies explained that they had a “non-cancelable order” between them. They declined to say why that deal was made without a purchase from the IRS. Shares of CrowdStrike fell as much as 2.7% after Bloomberg News reported on the deal.
Some legal and accounting experts, who reviewed the scheme at Bloomberg’s request, say it raises red flags that deserve scrutiny from regulators. The deal also raised concerns within CrowdStrike — according to people familiar with the matter and the company itself — and many details of the transaction remain unclear.
Depending on how CrowdStrike accounted for the deal in its financial statements — the company didn’t explain those details — the deal was big enough to make the difference between beating or missing Wall Street projections for the period. The day after CrowdStrike reported results for its record quarter, shares rose 10%.
Jeremy Fielding, a spokesman for CrowdStrike, dismissed employee concerns as unfounded and the timing of the order as insignificant. The Austin, Texas-based cybersecurity company closes deals “throughout the quarter, starting on the first day and often through the last day,” he said.