Blue Apron now faces multiple class-action lawsuits
Blue Apron has its hands full these days. Not only is it bearing the brunt of witnessing its share price declining to almost half since its June IPO, but also chances of legal trouble are now looming. Reportedly, several law firms are now coming at it with class-action lawsuits, claiming the firm had not divulged adequate material information as it should have. Here's more.
What's wrong?
The company, according to the law firms, has played down its challenges pertaining to customer retention, order delivery and expenditure on advertisements. Law firm Bragar Eagel and Squire said that Blue Apron's decision to reduce ad spending in Q2-17 would hamper sales and profit margins in its subsequent quarters. It also failed to retain its customers because of late delivery and/or missing expected ingredients.
What did it allegedly do?
Several other law firms, such as Bottini & Bottini, have made similar allegations. However, a Blue Apron insider believes some of these lawsuits are still looking for plaintiffs and that's a relief. Other than those already stated, one of the chief reasons why Blue Apron's stock tanked was Amazon's move to buy Whole Foods, just weeks prior to Blue Apron's IPO debut.
Is it something one should be bothered about?
All said and done, it's not radical to see firms, that are going through a rough patch, face such lawsuits. Apparently, there's a name for this phenomenon out in the market - stock-drop challenges. Facebook had several, post its disastrous 2012 IPO. Even recently, one shareholder slapped a lawsuit against Snap, saying that the firm had fudged the Snapchat app's user numbers.
Not so easy
Blue Apron is not exactly losing its sleep over these lawsuits, as most of these would get settled. In order to secure a win, the plaintiff's legal defense will not only have to prove that the firm has made false statements but also that those were material and the plaintiff relied on them to take a call. It's not a simple open-and-shut case.
