Snapchat Lawsuit Claims Executives Kept Investors In Dark About New Apple Privacy Restrictions

Snapchat Executives Ad Revenue Derivative Lawsuit Overview: 

• Who: Vonmarie Thomas, on behalf of Snap Inc., filed a derivative complaint against Snap’s executives, including co-founder and CEO Evan Spiegel and CFO Derek Andersen. 
• Why: Thomas claims Snap’s executives failed to disclose to investors that Apple’s new privacy features would hurt its advertising revenue. 
• Where: The derivative lawsuit was filed in Delaware federal court. 

Executives at Snapchat’s parent company, Snap Inc., kept investors in the dark about how new Apple privacy features were going to negatively affect its advertising revenue, a new derivative lawsuit alleges. 

Plaintiff Vonmarie Thomas claims the Snapchat executives breached their fiduciary duties to investors by minimizing the impact Apple’s new privacy features would have. 

Thomas, who filed the derivative complaint on behalf of Snap, argues the demand to advertise on Snapchat declined due to Apple’s new privacy features, and that, after a “weaker-then-expected” October 2021 earnings report, shares of Snap dropped 26%. 

“Rather than truthfully informing investors about the impact that these privacy features would have on its business, Snap continually downplayed the likely effect of the privacy features on the company’s business,” the derivative lawsuit states.

The claims against Snap are the third such filed against its executives, Law360 reports, including co-founder and CEO Evan Spiegel and CFO Derek Andersen, among 14 others. 

Apple unveiled its new privacy features in April of last year, at which time Snap chose to conceal in public disclosures the concerns that the features would hinder the company’s ability to track data. 

Snapchat Execs ‘Belatedly Disclosed’ New Apple Features Could Hurt Ad Revenue

Instead, Thomas argues Snap “belatedly disclosed” that Apple’s new iOS update could be an issue, causing its stock value to drop, harming investors. 

Thomas claims Snap’s executives were responsible for providing accurate information to their investors so that the market price of its stock would be based on knowledge that was “truthful” and “accurate.” 

“The (executives) had a duty to promptly disseminate accurate and truthful information regarding the Company’s business practices, operations, financials, financial prospects, compliance policies and internal controls,” the derivative complaint states.

Thomas claims Snap’s executives are guilty of insider trading, unjust enrichment and breach of fiduciary duties and in violation of the Exchange Act. 

Plaintiff is requesting declaratory relief and for Snap’s executives to pay restitution to Snap. 

Snap was included in a class action lawsuit last May that accused it and other social media companies of failing to protect its child users from being cyberbullied.

Are you a Snap investor who was injured financially after the company released its October 2021 earnings report? Let us know in the comments! 

The plaintiff is represented by Ryan M. Ernst of Bielli & Klauder, LLC, and Gregory M. Nespole, Daniler Tepper and Correy A. Kamin of Levi & Korsinsky, LLP. 

The Derivative Lawsuit is Thomas v. Spiegel, et al., Case No. 1:22-cv-00457, in the U.S. District Court for the District of Delaware.

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