The Honest Company, Inc. (HNST) Misled the Investing Public Regarding Product Demand
A shareholder filed a class action on behalf of all persons and entities that purchased or otherwise acquired The Honest Company, Inc. (NASDAQ: HNST) common stock in connection with the Company’s May 2021 initial public offering (“IPO”). The complaint pursues claims under the Securities Act of 1933. Honest claims to be 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.”
According to the complaint, the registration statement and prospectus filed in connection with the Company’s IPO were materially false and misleading. Specifically, defendants omitted that prior to the IPO, the Company’s financial results had been significantly impacted by a multimillion-dollar COVID-19 stock-up for products in its Diapers and Wipes and Household and Wellness categories and that at the time of the IPO, the Company was experiencing decelerating demand for such products.
On August 13, 2021, just three months after the IPO, Honest issued its second quarter 2021 financial results, reporting a net loss of $20 million for the second quarter of 2021, 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.” The Diapers and Wipes category experienced a revenue decline of 2% compared to the same quarter in 2020, and the Household and Wellness category experienced a revenue decline of 6% from the same quarter in 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 fell almost $4.00 per share, or 28%, to close at $10.07 per share on August 13, 2021. The stock currently trades around $9.37, significantly less than its $16.00 IPO price.
If you purchased shares of The Honest Company, Inc. (HNST) pursuant to the Company’s IPO, you have until November 15, 2021, to ask the court to appoint you lead plaintiff for the class.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.
