A claim for a class action lawsuit was filed by an investor against WEBTOON Entertainment Inc. on September 10th. The suit alleges that Webtoon, the massively popular Korean online comics platform, misled investors during the period of its Initial Public Offering (IPO). Several law firms are currently investigating if the claim has merit.
Webtoon became a publicly traded stock on June 27th of this year. The stock sold at $21.00 and the company posted they raised around $308.5 million from the sale. It was a big deal with a pop up in Times Square. When the company went public, their initial financial reporting seemed impressive and a company that was growing.
However, in August, not long after the initial offering ended, the company posted its 2024 second quarter financial results. According to those statements, the company reported revenue of $320 million which wasn’t much growth after that IPO. The company blamed declining advertising revenues and weak foreign currencies. The Beat reported on these losses at the time. As of September 11th, the stock closed at a price of $10.37 showing further decline on the company’s stock.
However, this suit alleges that Webtoon misled investors in its registration statement for the IPO. A registration statement is a document that according to the SEC website, where
“the company must clearly describe important information about its business operations, financial condition, results of operations, risk factors, and management.”
The suit alleges that the registration statement provided by the company omitted the weaker advertising revenues, deceleration in the IPO, and the exposure to weaker foreign currencies. The suit further alleges that investors were potentially mislead about the viability of Webtoon’s IPO.
At the moment, there’s is only a claim filed for the lawsuit. Several legal firms have put out a call to shareholder to report any issues by November 4th. More information should be available at that point or potential legal action taken. The Beat will continue to follow this story as it develops.
Special thanks to fellow Beat contributor Justin Guerrero for assistance and background for this article. UPDATED on September 16, with clarifications on the nature of the lawsuit.
