Snap Inc is being sued by its shareholders who claim that executives misled investors about the value of SnapChat app maker ahead of its IPO earlier this year.
The lawsuit [PDF], filed this month in the California Central US District Court, accuses Snap, CEO Evan Spiegel and CFO Drew Vollero of violating US securities laws. The case is led by named plaintiff Shinu Gupta filing on behalf of a class of shareholders.
The complaint alleges that Spiegel and others lied to investors about how well Snap was performing and fudged key metrics, including the rate at which the number of daily active users using the Snapchat service was growing.
This, they claim, led investors to pay a premium when Snap Inc held its IPO in March this year. That day, Snap stock was priced at $17 a share, but traded as high as $28.84. Later in the week, the shares peaked at $29.44.
That value, the suit claims, was inflated by deception from Snap's management. Weeks later, Snap's first quarterly report showed far less optimistic numbers – 166 million active users, up just five per cent on the previous quarter – and the share price began to nosedive. These days, Snap's stock price continues to fall, and at around $15.29 at the time of publication, it sits below even the IPO opening price.
The numbers in the quarterly report, along with the allegations made by former manager and whistleblower Anthony Pompliano, have Gupta convinced that he and other investors were criminally misled by management.
"Defendants' false and misleading statements and omissions in their SEC filings and other public statements during the Class Period directly and proximately caused losses to Plaintiff and the Class," the suit reads.
"As a result of their purchases of Snap stock during the Class Period at artificially inflated prices, Plaintiff and other Class members suffered damages as the true facts were revealed."
Snap Inc, Spiegel, and Vollero are accused of violating the US Securities Exchange Act. The suit seeks a jury trial to determine damages. ®