StubHub Faces Class Action Lawsuit From Investors Following Poor Quarterly Earnings

StubHub is currently facing a class action lawsuit after showing disappointing numbers in its quarterly earnings report shared on November 13. This was the company’s first quarter since going public. The plaintiff claims that the company was not forthright about the state of operations upon raising $758 million in its initial public offering back in September.

The numbers:

• The recent report from StubHub showed a negative cash flow of $4.6 million, with operating income 69% lower than the same quarter last year.

• StubHub’s share price dropped to $14.87 by November 14.

• Its lowest point was $10 on November 20.

• The original IPO was $23.50.

• StubHub said the slow business was due to “changes in the timing of cash receipts and payments associated with ticket sales as well as timing of payments to vendors.”

The complaint:

• “Specifically, [StubHub] failed to disclose to investors that: (1) the Company was experiencing changes in the timing of payments to vendors; (2) those changes had a significant adverse impact on free cash flow, including trailing 12 months free cash flow; (3) as a result, the Company’s free cash flow reports were materially misleading; and (4) that, as a result of the foregoing, [StubHub’s] positive statements about the Company’s business, operations, and prospects, were materially misleading and/or lacked a reasonable basis.”