May 17, 2021 - An investor in shares of ContextLogic Inc. (NASDAQ: WISH) filed a lawsuit in the U.S. District Court for the Northern District of California over alleged violations of Federal Securities Laws by ContextLogic Inc. in connection with certain allegedly false and misleading statements made between December 16, 2020 and May 12, 2021.
On or about December 16, 2020, ContextLogic Inc. sold about 46 million shares of stock in its initial public stock offering (the "IPO") at $24.00 a share, raising nearly $1.1 billion in new capital.
On May 14, 2021 the stock closed at $8.11. In the IPO Registration Statement, ContextLogic Inc. claimed to have had 108 million monthly active users (“MAUs”) as of September 30, 2020, the end of the last interim quarter prior to its IPO. ContextLogic Inc. stated there that it “define[d] MAUs as the number of unique users that visited the Wish platform, either on [its] mobile app, mobile web, or on a desktop, during the month,” emphasizing the materiality of the metric to investors by stating: “We view the number of monthly active users as key driver of revenue growth as well as a key indicator of user engagement and awareness of our brand.” ContextLogic Inc. reported its fourth quarter and fiscal year 2020 financial results for the period ended December 31, 2020 on March 8, 2021. ContextLogic Inc. disclosed that, by the time of its December 2020 IPO, ContextLogic’s MAUs had already “declined 10% YoY during Q4 to 104 million, primarily in some emerging markets outside of Europe and North America where Wish temporarily de-emphasized advertising and customer acquisition as the company worked through logistics challenges it faced earlier in the year.”
Then on May 12, 2020, when ContextLogic Inc. announced 1Q21 financial results for the interim period ended March 31, 2021, ContextLogic disclosed that its MAUs had declined another 7% to just 101 million. ContextLogic Inc’s forward sales guidance also fell short, with its second quarter 2021 revenue guidance of just $715 million to $730 million coming in significantly less than the $759 million the market had been led to expect and far less than the guidance of $735 to $750 million provided for 1Q21.
Shares of ContextLogic Inc. (NASDAQ: WISH) declined from $15.45 per share on April 29, 2021 to as low as $7.95 per share on May 13, 2021.
According to the complaint the plaintiff alleges on behalf of purchasers of ContextLogic Inc. (NASDAQ: WISH) common shares , that the defendants violated Federal Securities Laws. More specifically, the plaintiff claims that in the Registration Statement and Prospectus used to conduct the IPO and between December 16, 2020 and May 12, 2021, the defendants made materially false and misleading statements about the strength of ContextLogic’s business operations and financial prospects by overstating its then-present monthly active users (“MAUs”) and MAU growth trends.