Class action lawsuit filed against party goods supplier Party City Holdco Inc.

 

A securities class action suit was filed against a designer, manufacturer and distributor of party goods following allegations that its initial public offering registration statement and prospectus did not disclose certain risks.

The lawsuit was filed against Party City Holdco Inc. in the U.S. District Court for the Southern District of New York on behalf of shareholders who bought common stock in the company in connection with and following its IPO on April 16, 2015, according to a press release. Party City sells costumes, decoration, gifts and novelty goods.

“Party City released disappointing financial and operational results on Nov. 12.”

The class action filing claims that the company’s registration statement and prospectus for its IPO failed to inform investors that numerous risks had the potential to impact its business. For example, the lawsuit claims Party City did not disclose its soft consumer trends. In addition, the class action suit alleges that the company failed to explain the impact that Disney’s “Frozen” franchise had the year before. The company had not properly prepared for the unexpected demand for merchandise pertaining to the film. In addition, the complaint alleges that the company’s registration statement and prospectus did not include information on its store reset initiative.

Following this news, shares of Party City’s common stock dropped $1.75 per share, or 11.7 percent, to close at $13.13 per share on Nov. 13. Not only did the closing price represent a drop of over 11 percent from the day prior, it was also 22 percent lower than the day of its IPO, which came less than seven months before. On Aug. 13, 2015, James Harrison, the company’s CEO, noted that demand for “Frozen” merchandise could disrupt the stores’ remerchandising efforts. Then Party City released disappointing quarterly financial and operational results on Nov. 12, 2015. The company’s lackluster numbers were due to both the store reset initiative and the unexpected disruption caused by the demand for “Frozen” products, among other things.

For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or info@battea.com.