A securities class action suit was filed against a company that develops, manufactures and distributes fitness products, after it was revealed that a component of its products did not perform as expected.
The lawsuit against Fitbit Inc. was filed in the U.S. District Court for the Northern District of California on behalf of investors who purchased shares in the fitness tracking device provider in connection with its June 18, 2015 initial public offering, or during the class period from the IPO date to Jan, 6, 2016, according to a press release. The class action filing claims that the company and certain officers with it violated federal securities laws. The lawsuit came after revelations about Fitbit’s wearable fitness tracking devices. Some of the products include heart rate monitoring technology, in addition to GPS and other activity trackers.
Fitbit’s heart rate monitoring allegedly inaccurate and inconsistent
The class action filing alleges that the defendants failed to disclose that Fitbit products’ heart rate monitoring technology did not offer consistent and accurate heart rate data to device wearers during their exercise routines. These issues, the lawsuit claims, posed significant health risks for Fitbit users. Individuals who based lifestyle choices and exercise activity off of the inaccurate heart rate information were exposed to health hazards, the complaint claimed. It goes on to allege that as a result of the aforementioned complaints, the company’s public statements at all relevant times were false and/or misleading.
“Fitbit stock dropped to an all-time low of $18.50.”
Lawsuit alleges significant health hazards
A class action lawsuit, separate from the securities suit, was filed against the company on Jan. 6. The lawsuit, McLellan et al. v. Fitbit, Inc., claimed that the inaccurate heart rate monitoring technology posed serious health risks for Fitbit Charge HR and Fitbit Surge users. The claim noted that the allegations included numerous violations of California’s Unfair Competition Law and Consumers Legal Remedies Act, unjust enrichment and common law fraud.
On news of the class action lawsuit against the company, prices of its securities fell. Fitbit stock dropped $1.40, or 5.8 percent, to close at $22.90 on Jan, 6. On Jan. 11, shares dropped below the $20 IPO price for the first time in Fitbit’s history as a public company, to $18.50.