Pomerantz LLP announces that a class action lawsuit has been filed against The Honest Company, Inc. and certain of its officers. The class action, filed in the United States District Court for the Central District of California, and docketed under 21-cv-08033, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Honest common stock pursuant and/or traceable to the registration statement and prospectus (collectively, the “Registration Statement”) issued in connection with the Company’s May 2021 initial public offering (“IPO” or the “Offering”). Plaintiff pursues claims against the Defendants under the Securities Act of 1933 (the “Securities Act”).
If you are a shareholder who purchased or otherwise acquired Honest common stock pursuant and/or traceable to the Registration Statement in connection to the company’s IPO, you have until November 15, 2021 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at firstname.lastname@example.org or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
Honest claims it is a “digitally-native, mission-driven brand focused on leading the clean lifestyle movement, creating a community for conscious consumers and seeking to disrupt multiple consumer product categories.” Honest’s three product categories are (1) Diapers and Wipes, (2) Skin and Personal Care, and (3) Household and Wellness. According to Honest, these three categories represented 63%, 26% and 11% of Honest’s 2020 revenue, respectively.
On May 6, 2021, the Company filed its prospectus on Form 424B4 with the SEC, which forms part of the Registration Statement. In the IPO, the Company sold 6,451,613 shares of common stock, plus an additional 3,871,050 shares of common stock pursuant to the underwriter’s option to purchase additional shares at a price of $16.00 per share. Certain existing stockholders also sold an aggregate of 19,355,387 shares of common stock in the IPO for $16.00 per share, including 15,229,543 by the executive officers and directors of Honest as a group (excluding the underwriters’ over-allotment option).
The complaint alleges that the Registration Statement was materially false and misleading and omitted: (1) that, prior to the IPO, the Company’s results had been significantly impacted by a multimillion-dollar COVID-19 stock-up for products in the Diapers and Wipes category and Household and Wellness category; (2) that, at the time of the IPO, the Company was experiencing decelerating demand for such products; (3) that, as a result, the Company’s financial results would likely be adversely impacted; and (4) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects, were materially misleading and/or lacked a reasonable basis.
On August 13, 2021, before the market opened, Honest issued a press release titled “The Honest Company Reports Second Quarter 2021 Financial Results.” Therein, Honest reported a net loss of $20 million for the second quarter of 2021, as compared to a net loss of only $0.4 million for the second quarter of 2020. Honest disclosed that its revenue grew only 3% as compared to the second quarter of 2020, because it was negatively impacted by “an estimated $3.7 million COVID-19 stock-up impact primarily in Diapers and Wipes in the prior year period.” Honest also disclosed that its Diapers and Wipes category revenue declined 2% compared to the second quarter of 2020. Honest further disclosed that “Household and Wellness revenue declined 6% from the second quarter of 2020 as consumer and customer demand for sanitization products decreased as consumers became vaccinated and customers managed heavy levels of inventory.”
On this news, the Company’s stock price fell $3.98 per share, or 28%, to close at $10.07 per share on August 13, 2021, on unusually heavy trading volum
On August 19, 2021, the Company’s stock price closed at an all-time low of $9.16 per share, a nearly 43% decline from the $16.00 per share IPO price.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com
Robert S. Willoughby
888-476-6529 ext. 7980