Summary: This is a class action by investors who claim that Casper misrepresented the profitability and future prospects of the company in their IPO. The alleged misrepresentations are listed on page 16:
The statements identified in ¶¶32-40 were inaccurate statements of material fact because they failed to disclose the following adverse facts that existed at the time of the IPO:
(a) that Casper’s profit margins were actually declining, rather than growing;
(b) that Casper was changing an important distribution partner, costing it 130 basis points of gross margin in the first quarter of 2020 alone;
(c) that Casper was holding a glut of old and outdated mattress inventory that it was selling at steeply discounted clearance prices, further impairing the Company’s profitability;
(d) that Casper was suffering accelerating losses, further placing its ability to achieve positive cash flows and profitability out of reach;
(e) that Casper’s core operations were not profitable, but were causing the Company to suffer over $40 million in negative cash flows during the first quarter of 2020 alone and doubling its quarterly net loss year over year;
(f) that, as a result of (a)-(e) above, Casper’s ability to achieve profitability, implement its growth initiatives, and expand internationally had been misrepresented in the Registration Statement, as the Company needed to shutter its European operations, halt all international expansion, jettison over one fifth of its global corporate workforce, and significantly curtail new store openings in order to avoid an imminent cash and liquidity crisis, let alone achieve positive operating cash flows; and
(g) that, as a result of (a)-(f) above, Casper’s revenue growth rate was not sustainable and had not positioned the Company to achieve profitability.
