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The Honest Company lawsuit The Honest Company stock
(Photo Credit: Dennis Diatel/Shutterstock)

The Honest Company Stock Class Action Lawsuit Overview:

  • Who: The Honest Company has been hit with a Securities Exchange Act class action lawsuit.
  • What: The lawsuit claims the company’s lied to investors about its prospects going into the COVID-19 pandemic when it filed its IPO
  • Where: The lawsuit is nationwide.

The Honest Company lied to investors about the prospects of its business during the COVID-19 pandemic, hiding already present threats ahead of its IPO, resulting in tumbling stock prices and investor damages, a new class action lawsuit alleges.

The lawsuit was filed in California on September 15 by lead Plaintiff Cody Dixon who alleges that the company and its leadership violated the Securities Exchange Act by making false and misleading statements in its Registration Statement.

Honest describes itself as 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.” Its three product categories are diapers and wipes, skin and personal care, and household and wellness.

The Honest Company Stock Price Inflated By False Statements About Demand

Dixon says in the claim that, prior to the IPO, the company’s results had been significantly impacted by a multimillion-dollar COVID-19 stock-up for products in the diapers and wipes category and household and wellness category; that it was already experiencing decelerating demand for such products; that, as a result, its financial results would likely be adversely impacted; and, because of those factors, its positive statements about its business, operations, and prospects, were materially misleading and lacked a reasonable basis.

The company sold more than 10 million shares at $16 each when it went public on May 6, 2021, and it received proceeds of around $91.1 million.

According to the claim, the company said that the proceeds from the IPO would go towards general corporate purposes, including “operating expenses, working capital and capital expenditures for future growth, including marketing and direct-to-consumer advertising investments, innovation and adjacent product category expansion, international growth investment and organizational capabilities investments.”

Honest further claimed that it “may also use a portion of the net proceeds . . . to acquire complementary businesses, products, services or technologies.”

However, only two months after the IPO, Honest issued a press release titled “The Honest Company Reports Second Quarter 2021 Financial Results,” where it reported a net loss of $20 million for the second quarter of 2021, as compared to a net loss of only $0.4 million for the second quarter of 2020.

On this news, The Honest Company stock price fell $3.98 per share, or 28 percent, to close at $10.07 per share. Then, on August 19, the company’s stock price closed at an all-time low of $9.16 per share, a nearly 43 percent decline from the $16 IPO offering.

Dixon says in the claim that the company’s “wrongful acts and omissions” are to blame for “the precipitous decline in the market value of the Company’s securities.”

“Plaintiff and other Class members have suffered significant losses and damages,” he adds.

He is suing for violations of the Securities Act and seeks certification of the Class, damages, legal fees and costs, and a jury trial.

Have you ever invested in a company only to have the stock price drop immediately? Let us know your experience in the comments section!

Dixon is represented by Robert V. Prongay, Charles H. Linehan and Pavithra Rajesh of Glancy Prongay & Murray LLP.

The Honest Company Stock Class Action Lawsuit is Dixon v. The Honest Company, Inc, et al., Case No. 2:21-cv-07405 in the U.S. District Court Central District of California.


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8 thoughts onThe Honest Company Lied to Investors About COVID’s Impact, Class Action Lawsuit Alleges

  1. Renata Burford says:

    Please add me.

  2. Claudia Ramirez says:

    Would love to be add 2

  3. Mary Moore says:

    Add me please and Thank You!

  4. Michael Paul Sizemore says:

    Please add me to the list.

  5. MELODY COTTON says:

    Please add me to this lawsuit

  6. Dr Toula Milios Guilfoyle says:

    I lost thousands of dollars HONEST IPO. I bought over 5000$ of HNST when went public on Robinhood. I want to join class action against HNST,HOW DO I??

  7. Heather says:

    Add me

  8. Aimee Grosey says:

    Add me please and thank you!

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