More Law Firms Pile On StubHub Class Action Litigation Over IPO

Photo Credit: StubHub

StubHub is getting dog-piled in class action lawsuits and investigations over allegedly withholding cash flow problems during its initial public offering.

Investors who participated in secondary ticketing platform StubHub’s $758 million initial public offering (IPO) in September are launching multiple class action lawsuits against the company. The lawsuits allege that StubHub withheld information about its cash flow changes from shareholders, which led to its less-than-stellar third-quarter earnings report and subsequent stock plunge.

The first complaint was filed on Monday (November 24), in Manhattan federal court on behalf of investor Daniel Salabaj by Glancy Prongay & Murray. Since then, at least eight other firms have announced similar investigations into StubHub’s financials, including Kirby McInerney LLP, Robbins LLP, Faruqi & Faruqi LLP, Schall Law Firm, Pomerantz LLP, Rosen Law Firm, the Law Offices of Frank R. Cruz, and the Law Offices of Howard G. Smith.

Each stems from investors who bought into StubHub’s $758 million IPO in September. The company released its first earnings as a public company on November 13, reporting negative $4.6 million free cash flow. That’s down from a positive $10.6 million during the same period last year. As a result, StubHub’s stock price dropped by 56%.

Salabaj’s lawsuit alleges that investors were blindsided by the news of StubHub’s cash flow decrease, despite the company’s pre-IPO registration statement warning that earnings could fluctuate. The lawsuit claims that information was “glaringly omitted” from the actual regulatory paperwork.

“The complaint filed in this class action alleges that [the] Registration Statement was materially false and/or misleading, and failed to disclose material adverse facts about the Company’s business, operations, and prospects,” the lawsuit from Salabaj reads.

His attorneys further allege that StubHub failed to notify investors that it was experiencing fluctuations in the timing of payments to vendors, which affected its free cash flow. StubHub only provided this information in its quarterly report, attributing the drop in free cash flow to “changes in the timing of cash receipts and payments associated with ticket sales as well as the timing of payments to vendors.”

In addition to StubHub itself being named as a defendant, the class action names CEO Eric Baker and other executives, as well as several investment banks that underwrote the offering. These include JPMorgan Chase, Goldman Sachs, and Bank of America.