Shares of cybersecurity company CrowdStrike (NASDAQ: CRWD) continue to drop on Tuesday after its major software update problem of more than a week ago. The stock was already down more than 30% from recent highs, and investors might have thought that the worst was over once the problem had been corrected. But today, Delta Air Lines is reminding investors that this ordeal is far from over, which is why CrowdStrike stock was down 9% as of 10:45 a.m. ET.
Who is going to pay Delta's bill?
On July 19, CrowdStrike updated its software. But the update had a defect, which knocked out Microsoft's Windows operating system for businesses around the world. Major airlines were among those with systems that went down, causing widespread travel delays. And now, Delta may be looking for compensation.
According to CNBC, Delta just hired prominent attorney David Boies, which suggests that it may be considering a lawsuit against CrowdStrike. The cost of the outage for Delta alone is estimated to be up to $500 million.
What can investors expect?
There are legitimate reasons for investors to be concerned about future growth for CrowdStrike. While business has been booming, the company may have suffered some reputational damage because of its misstep, which may keep some customers from signing new contracts in the near term.
Even if CrowdStrike's revenue doesn't take a hit from this, this news from Delta is a reminder that its cash position could be hurt. A court could rule that it's on the hook for Delta's expenses. And that's just one airline. The company could be facing similar litigation from the other major airlines that went down during the ordeal.
With roughly $3 billion in net cash as of the latest quarter, CrowdStrike is in a strong financial position to overcome its costly error. That's good. But if it has to compensate all the businesses that went down in the Windows outage, it will undeniably hit shareholder value, which is why CrowdStrike stock is still falling today.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Microsoft. The Motley Fool recommends Delta Air Lines and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Why CrowdStrike Stock Continues to Drop Today was originally published by The Motley Fool