Funko settles class action alleging it misled investors over inventory, sales for $7M

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Funko inventory class action lawsuit overview: 

• Who: Funko Inc. agreed to pay $7 million to resolve claims made by Gilberto Ferreira. 
• Why: Funko agreed to the class action settlement to resolve claims it misled its investors about the size of its inventory and its sales projections. 
• Where: The class action lawsuit was filed in California federal court. 

Funko Inc. agreed to pay $7 million as part of a settlement made to resolve claims the company misled its investors about its inventory and sales projections. 

Shareholders argued that Funko misled its investors by saying it accumulated a large amount of inventory that was actually obsolete, Law360 reports. 

The shareholders claimed further that executives for Funko sold off their shares at an inflated price prior to the company announcing an inventory write-down due to underperforming sales. 

The Funko class action settlement will allow shareholders to recover 8.7% of the maximum $80 million in estimated damages, according to a motion for final settlement approval. 

Funko class action alleges CEO engaged in ‘illegal insider trading’

The Funko class action alleges the company withheld the inventory write-down from its shareholders when it made a statement to them in October 2019, Law360 reports. 

It also claims Funko’s then-CEO Brian Mariotti sold off 400,000 company shares during its secondary public offering. The shareholders argue that Mariotti’s move to sell shares was akin to illegal insider trading since  it was done with information that was not available to the public, Law360 reports. 

A consumer filed a similar class action lawsuit against Twitter last month, arguing that the company and its top executives failed to disclose security concerns to the public. 

Were you financially harmed after Funko publicly disclosed its inventory write-down? Let us know in the comments! 

The plaintiffs are represented by Michael J. Wernke, Jeremy A. Lieberman and Jennifer Pafiti of Pomerantz LLP; Stephanie M. Beige and Stanley D. Bernstein of Bernstein Liebhard LLP; and Peretz Bronstein of Bronstein Gewirtz & Grossman LLC.

The Funko class action lawsuit is Ferreira v. Funko Inc., et al., Case No. 2:20-cv-02319, in the U.S. District Court for the Central District of California.

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