A law firm recently filed a class action suit against a hyperlocal online advertising company following allegations that it, some of its officers and the underwriters of its initial public offering violated federal securities laws.
The securities class action lawsuit was filed against MaxPoint Interactive, Inc. in the U.S. District Court for the Southern District of New York on behalf of investors who purchased stock in the company during its IPO on March 6, 2015, according to a press release. The suit claims that MaxPoint, some of its executives and its IPO underwriters all violated the Securities Act of 1933. The company offers business intelligence and marketing automation software services developed to assist national organizations with fueling local in-store sales.
MaxPoint's registration statement hides realities about budding business
In MaxPoint's March 6 IPO, the company sold 6.5 million shares of MaxPoint common stock to the public at $11.50 per share according to the Registration Statement and Prospectus, the press release explained. The company was able to raise over $74.75 million through its IPO.
"Two-thirds of its sales were attributable to just 50 customers at the time of its IPO."
The complaint alleges that the registration statement connected with MaxPoint's IPO contained false and misleading statements regarding the company's financial condition, business and prospects. The class action filing claims that MaxPoint failed to reveal that two-thirds of its sales were attributable to just 50 customers at the time of its IPO. Due to the high customer concentration leading up to the day the marketing solutions provider went public, it was left acutely exposed to the budgetary tendencies and promotional strategies of those clients.
Additionally, the class action filing claims that MaxPoint had been signing smaller customers with less expansive budgets during the stretch leading up to its IPO, which led to a decline in sales growth. This was an unfortunate development that many believed would have a detrimental impact on the company's profitability.
MaxPoint fails to recover in months following 'disappointing' IPO
The day of the company's IPO was described as "disappointing," according to Business Insider. But the media outlet noted that there was always a chance for a comeback due to the nature of MaxPoint's contracts and historical precedent.
"A poor debut causes companies to lose shareholders that they work hard to get," Will Preston, research analyst for IPO exchange-traded fund manager Renaissance Capital, and the individual who called the IPO "disappointing," told Business Insider. "That doesn't mean the stock can't recover, though it will be a little harder because of the shareholder turnover, and it will need to execute out of the gate with some strong earnings reports."
However, a comeback has yet to materialize. Since the March IPO, common stock in MaxPoint has declined 60 percent and, at the time of the press release, was trading at below $5 per share.
For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or info@battea.com