Two separate, but similar, investor class actions were recently settled with Snap, Inc. The two cases – one in Federal court and one in State court – concludes litigation related to Snap’s highly touted IPO from March 2017.
A tentative agreement for $187.5 million was reached between Snap and investors back on January 17, 2020; however only within the last week did the two courts take the necessary steps that detail how and when investors can participate in order to recover portions of their lost assets.
Specific allegations against Snap were as follows:
The complaint stated the company made false and/or misleading statements about Snap’s user growth. Specifically, during its first quarterly report as a public company, Snap disclosed disappointing user growth of 166 million daily users within the Snapchat messaging platform. The additional 8 million users from the previous period was the slowest growth rate in at least two years. On this news, Snap’s share price fell 21.5% to close at $18.05 on May 11, 2017. Days later, Bloomberg reported a former Snap employee, Anthony Pompliano, was seeking whistleblower protection for claiming he was fired after raising questions about allegedly false growth metrics.
The complaint stats similar allegation to the above plus further detailed concerns with Snap’s Form S-1 along with the final Prospectus filed with the U.S. Securities and Exchange Commission around the time of the company’s IPO. Specifically, investors stated the SEC documents contained materially false and misleading statements regarding the company’s business, operational, and compliance policies. The allegations relate directly to Snap’s slowing growth in their reported daily average users (“DAUs”).
|Court Venue||Initial Complaint||Class Period||Settlement Amount|
|USDC California – Central||May 16, 2017||March 2, 2017 – August 10, 2017||$154,687,500|
|California Superior Court – Los Angeles County||July 25, 2017||March 2, 2017 – July 29, 2017||$32,812,500|
Investors have until January 25, 2021 to submit their eligible claims with JND Legal Administration, the court appointed claims administrator. The two settlements confirmed that one submitted claim will cover both the Federal and State cases. With a claim deadline date in early 2021, this $187.5 settlement will kick-off the new year with one of the larger IPO-related settlements of all-time.
As always, ISS Securities Class Action Services will keep its clients up-to-date on any further case developments.
By Jeff Lubitz, Executive Director, ISS Securities Class Action Services