ContextLogic Misled Investors to Inflate Its IPO, Class Action Lawsuit Alleges

Global mobile ecommerce company ContextLogic artificially inflated its stock price ahead of its initial public offering (IPO) in December last year, hurting investors when stock prices plummeted, a new class action lawsuit alleges.

Plaintiff Jerrett Boehning, a ContextLogic investor, filed the class action against ContextLogic Monday in a California federal court on behalf of himself and other investors, alleging violations of federal securities laws.

ContextLogic is a San Francisco-based company that operates the ecommerce platform Wish. 

Boehning says ContextLogic completed its IPO on December 16 last year, where it issued and sold 46 million shares of its Class A common stock at $24 per share, raising more than $1.1 billion.

He says, in a prior IPO Registration Statement, ContextLogic repeatedly claimed to have had 108 million monthly active users as of Sept. 30, 2020 — telling investors that was a key driver of revenue growth.

However, when it reported its fiscal year 2020 financial results on March 8, 2021, it disclosed that in reality its monthly active users had already declined 10 percent year-on-year during Q4.

“On this news, the market price of ContextLogic common stock declined on March 8, closing down more than 10 percent at $15.94 per share on unusually high trading volume of more than 10 million shares trading.”

Boehning said the market price of ContextLogic common stock still remained artificially inflated based on the company’s statements that day about “continued strong demand.”

But on May 12, ContextLogic announced more financial results, revealing its monthly active users MAUs had declined another 7 percent to “just 101 million.” 

On this news, the market price of ContextLogic common stock declined $3.36 per share, or 29 percent, the class action says.

Boehning is seeking to represent all purchasers of the common stock of ContextLogic issued in connection with its IPO, and those who bought stock from Dec. 16, 2020 and May 12, 2021.

He is suing under the Securities Act of 1933 and the Securities Act of 1934 and is seeking certification of the class action, damages, costs, fees and a jury trial.

Defendants include ContextLogic, several of its current and former executives and directors, and the investment banking firms that served as underwriters in the IPO. 

ContextLogic is one of a number of listed companies currently facing class action lawsuits alleging they inflated their stock prices. Biopolymer plastics manufacturer Danimer Scientific and its executive team and board was accused of lying to investors and about the company’s products, operations, and compliance in order to inflate share prices, in a new class action lawsuit.

And recycling company PureCycle also allegedly lied to investors about its product, expected revenue, and more when it listed an IPO, falsely inflating share prices and violating the Securities Exchange Act, another class action lawsuit claims.

Did you invest in stocks you now believe had artificially inflated prices? Let us know in the comments! 

The plaintiff is represented by Shawn A. Williams, Samuel H. Rudman and Mary K. Blasy of Robbins Geller Rudman & Dowd LLP and Frank J. Johnson of Johnson Fistel, LLP.

The ContextLogic Securities Act Class Action Lawsuit is Boehning et al., v. ContextLogic Inc., Case No. 3:21-cv-03671, in the U.S. District Court Northern District of California.

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