Snap faces shareholder lawsuit after stock price drops
A Snap Inc. shareholder sued the company Tuesday for allegedly misrepresenting how many people used its Snapchat app.
In a lawsuit filed in U.S. District Court in Los Angeles, James Erickson of Suffolk County, N.Y., blamed Snap’s alleged misrepresentations for a drop in the price of the company’s shares. He’s seeking unspecified damages and a class-action designation. Such lawsuits — commonly filed after a stock’s drop in value — are often struck down.
Erickson’s concerns, according the lawsuit, are rooted in allegations lodged by former Snap employee Anthony Pompliano. In ongoing lawsuits in both federal and state courts, Pompliano claims that Snap’s metrics tools were insufficient and that executives boasted Snapchat had 100 million users when internal data showed a few million less. Snap has denied Pompliano’s allegations and cast him as a disgruntled former employee.
The Los Angeles company had warned investors before its initial public offering that measuring usage can be challenging. Snap said it adjusted some counting procedures in 2015, and that it was now using what employees believe to be “reasonable estimates.”
Erickson’s attorney, Jennifer Pafiti, didn’t respond to a request to comment about whether she had collaborated with Pompliano’s legal team.
Snap said in a statement that lawsuits such as Erickson’s were “not uncommon” and that it remained “focused on growing our business.”
Snap shares closed at $20.78 Tuesday, down from their listing debut of $24 in March.
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