An online retail company recently announced that a class action settlement has been reached between the e-commerce business and its shareholders.
The Rosen Law Firm announced that it had filed a securities class action lawsuit against LightInTheBox Holding Co. Ltd. in August 2013 on behalf of all investors who purchased LightInTheBox securities between June 6, 2013, and Aug. 19, 2013. At the time, three shareholder class action lawsuits were filed in the U.S. District Court for the Southern District of New York. Complaints charged that the retailer violated the Securities Exchange Act of 1934. The settlement, which remains subject to court approval, states that the company, as well as its insurers, should pay $1.55 million into a settlement fund intended for those who purchased shares during the designated period.
The suit filed by Rosen Law Firm alleged that LightInTheBox failed to disclose a large drop in both sales and growth during the second quarter of 2013. Additionally, the company allegedly made no mention of the fact that its costs had outgrown its sales during the same period and as a result of the aforementioned claims, potentially misrepresented to the market the financial results it was capable of achieving. The litigation alleged that LightInTheBox posted second quarter results below expectations, which led the company’s stock to lose close to 40 percent of its value.
Less than one month after the company’s initial public offering, and at the end of the second quarter, on June 30, the company posted profits of $0.05 per share and revenues of $72.2 million. This was below investor expectations – earnings of $0.06 per share and $75.8 million in revenue. Revenue for the retailer grew by 52.6 percent, while operating costs rose by 57 percent.
LightInTheBox asserts settlement is not an admission of wrongdoing
Though the company has reached a settlement and the plaintiff has agreed to dismiss all claims against LightInTheBox, the retailer contends that the agreement is by no means an admission of guilt. LightInTheBox stated that the charges against the company are not justified, and that any statements the company made in its IPO prospectus were accurate and reflective of its business. Additionally, the company has stated that it did inform investors of potential risks. It claims that it has agreed to the settlement in an attempt to avoid the unpredictable and expensive consequences of litigation.