FAT Brands Inc., (FAT) Accused of Misrepresenting Its Financial Figures in Its Offering Documents
According to the recent class action complaint, on October 23, 2017, FAT held its IPO, selling 2 million shares of common stock priced at $12 per share, raising $24 million in gross proceeds. FAT officials subsequently emphasized that FAT’s asset-light business model allows for growth with minimal capital expenditures through franchising. Despite these representations, FAT’s then-present free cash flow was not enough to cover its outsized dividend. In addition, at the time of the IPO, FAT failed to disclose that its sales growth had significantly declined and that the fast-casual dining sector was facing slowdown in growth due to customers fleeing to cheaper, quicker fast-food chains. When the market learned the truth about FAT’s business metrics and financial prospects, FAT’s stock plummeted, and now trades at less than $8 per share, a 34% decrease from its IPO price.