Snap shareholders can pursue claims that IPO hid crucial facts, judge rules

Investors who claim they were deceived when Snapchat’s parent company went public last year will get a chance to pursue damages in court.

Snap Inc., the maker of the application for ephemeral messages and videos, lost its bid to dismiss a securities lawsuit stemming from its initial public offering in March 2017. The next step for shareholders is to request class-action status, which would give them additional leverage to negotiate a settlement.

The investors allege that, before the IPO, Snap didn’t reveal how much competition from Instagram, the photo-sharing app, was hurting its growth in the second half of 2016.

They also say Snap failed to disclose a sealed whistle-blower lawsuit by a former employee who alleged inaccuracies in the company’s calculation and reporting of daily active users.

In addition, they said Snap misrepresented its use of “growth hacking,” the practice of sending push notifications to subscribers to drive up its daily-user count.

Thursday’s order allowing the case to proceed was issued by U.S. District Judge Stephen Wilson in Los Angeles. Snap declined to comment on the ruling.