Dive Brief:
- Instacart is facing a class action lawsuit that claims the grocery technology company misled investors ahead of and immediately following its initial public offering last September.
- The suit, filed last Thursday in federal court, also names as defendants Instacart founder Apoorva Mehta, executives including CEO Fidji Simo and several members of the company’s board.
- Instacart’s share price sank below its $30 offering price several days after the company went public and has remained below that level.
Dive Insight:
The lawsuit, filed in U.S. District Court for the Northern District of California, calls into question statements Instacart made about its business, operations, and prospects as it looked to build interest in the company among investors as it prepared for its public market debut.
The suit alleges that Instacart painted an overly rosy picture about the opportunities it saw for growth in the online grocery sector, describing the company’s registration statement as “materially false and misleading.” The lawsuit also claims Instacart’s offering documents “were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules and regulations governing their preparation.”
In addition, the plaintiffs claim that Instacart downplayed risks it faces by using “generic, catch-all provisions that were not tailored to Instacart’s actual known risks regarding its competition in the online grocery shopping and delivery market.”
The suit also alleges that a letter from Simo that Instacart published on the day its shares began publicly trading was “materially false and misleading,” in part because it did not “disclose material adverse facts about the Company’s business, operations, and prospects.”
Instacart’s stock began trading on Nasdaq at $42 per share on Sept. 19, 2023, and closed that day at $33.70, the highest closing price since the IPO. The company’s share price finished below $30 for the first time on Sept. 26, 2023, and has remained below that level ever since. On Monday, Instacart shares closed at $25.88, up from $25.48 on Friday.
The plaintiffs claim that investors who bought Instacart’s shares between Sept. 19 and Oct. 1, 2023, “have suffered significant losses and damages” as a result of the decline in Instacart’s share price and are demanding that the company pay them unspecified damages.
An Instacart spokesperson declined to comment on the suit.
