OAKLAND, Calif. (Legal Newsline) – A lawsuit filed in a federal court in California states cloud-hosting and storage service Dropbox allegedly damaged investors because it made misleading statements during its initial public offering and caused artificially inflated prices.
Bryan Pikal, on behalf of himself and others, filed a class action suit against Dropbox and individual and underwriter defendants including Merrill Lynch, Goldman Sachs, Co., and J.P. Morgan Securities LLC in the U.S. District Court for the Northern District of California on Oct. 4.
The suit states Dropbox filed a registration statement for an initial public offering (IPO) in February 2018 and also privately offered Class A stock the same year and sold more than 4.7 million shares. The plaintiff alleges company insiders, which included individual defendants, sold stock and earned more than $184 million.
"The registration statement was negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and was not prepared in accordance with the rules and regulations governing its preparation," the suit states.
"The statements... were materially false and misleading at the time of the IPO, because, as was demonstrated internally by data analytics employed by the company at the time of the IPO, the company had materially overstated its ability to monetize its user base. Less than 1 percent of the '300 million' registered users were likely to be added to the company’s paying user base in the year following the IPO, and internal Dropbox data had demonstrated that the company was tracking behind its budgeted monetization targets."
The plaintiff alleges he and class members have been damaged because Dropbox's stock price has fallen below its IPO price.
Pikal seeks compensatory damages, reasonable costs and expenses, certification of the class and a trial by jury. He is represented by Laurence M. Rosen of the Rosen Law Firm PA in Los Angeles.
U.S. District Court for the Northern District of California case number 4:19-cv-06360