Uber, its individual executives and board members, and underwriters who helped solicit investors were sued Saturday in a class-action complaint in the Northern District of California by purchasers of its IPO Class A common stock for allegedly violating the Securities Act of 1933 for their purported false, misleading or omitted information in Uber’s IPO Offering Documents.
This is the second such suit against Uber concerning its IPO in recent weeks; another suit was filed in November.
According to the complaint, on May 13, 2019, Uber conducted its Initial Public Offering (IPO) and sold more than 180 million shares of its Class A common stock at $45.00 per share, thus raising more than $8 billion. The plaintiffs asserted that this “represented an extraordinary financial windfall for the 29 Underwriter Defendants…who collected over $106.2 million in fees in connection with the IPO.”
However, the plaintiffs averred that the IPO Registration Statement and Prospectus were materially false and omitted crucial information. Specifically, the plaintiffs claimed that the defendants omitted the fact that Uber was “plagued by serious safety problems, which were compounded by patently defective investigative and safety enforcement policies and practices that were shamefully insufficient to adequately prevent, punish, and deter acts of sexual assault and other tortious conduct against Uber customers.”
The plaintiffs additionally contended that at the end of the second quarter of 2019, which closed after the IPO, Uber recorded a loss of $5.2 billion, “its largest quarterly loss ever.” The company allegedly failed to disclose that “as of the IPO, Uber’s revenue growth rate was stagnating or declining…due in substantial part to the Company’s pre-IPO decision to significantly increase the amount of subsidies given to Uber drivers and customers for using and providing Uber’s ride and meal delivery services” in an effort to gain market share over the competition.
Lastly, the plaintiffs alleged that Uber did not sufficiently inform investors about the likelihood that it would have to reclassify drivers as employees and the effect that this would have on its operations. Furthermore, Uber also purportedly did not adequately disclose how its business policies and practices “subjected it to decreased revenue growth as a result of adverse regulatory actions” by various jurisdictions, who could shut Uber out of important markets.
The plaintiffs asserted that after Uber’s IPO as this information became available, the price of Uber’s stock decreased from the initial IPO price of $45.00 per share to below $34.00 per share within three months of the IPO and continued to fall during 2019 to a low of $25.99. This decline represents a decrease of approximately 25% from the IPO Price.
The plaintiffs are represented by Scott + Scott Attorneys At Law LLP; Robbins Geller Rudman & Dowd LLP; Cotchett, Pitre & McCarthy, LLP; Bottini & Bottini, Inc.; Robbins LLP; Bragar Eagel & Squire, P.C.; Pomerantz LLP; The Schall Law Firm; Hedin Hall LLP; and the Law Offices of Curtis V. Trinko, LLP.