StubHub Hit with Class Action Lawsuits After Stock Plunge

Photo Credit: Tingey Law

StubHub faces a class action lawsuit from investors alleging the company hid key cash flow changes relating to its post-IPO stock price plunge.

A shareholder class action lawsuit has been filed against StubHub following its post-IPO stock price plunge. The lawsuit alleges the company made materially false or misleading statements, failing to disclose “material adverse information” regarding its business and cash flow.

The complaint, filed in New York federal court on Monday, is one of at least three lawsuits stemming from StubHub’s lackluster quarterly earnings report. It was filed by investors who bought into StubHub’s $758 million initial public offering (IPO) in September. At least four other law firms have announced that they’ve opened their own investigations into StubHub’s numbers.

StubHub released its first earnings as a public company on November 13, with some less than stellar numbers. The company reported free cash flow of negative $4.6 million that quarter—down from a positive $10.6 million in the same period last year. The market balked as a result, and StubHub’s stock dipped by 56% to as low as $10.31 per share.

The lawsuit, headed by Daniel Salabaj, an investor who bought StubHub stock during its IPO on September 17, alleges that he and other investors were blindsided by the news of StubHub’s cash flow decrease. While StubHub’s pre-IPO registration statement warned that quarterly earnings could fluctuate due to the timing of major live events, Salabaj says this was “glaringly omitted” from the regulatory paperwork.

“The registration statement was materially false and misleading and omitted to state: (1) the company was experiencing changes in the timing of payments to vendors; (2) those changes had a significant adverse impact on free cash flow,” Salabaj’s attorneys write. “As a result of the foregoing, defendants’ positive statements about the company’s business, operations, and prospects were materially misleading.”

The lawsuit names StubHub as a company, as well as executives including CEO Eric Baker. Banks that underwrote StubHub’s IPO, including JP Morgan, Goldman Sachs, and Bank of America, are also listed as defendants.