NEW YORK–(BUSINESS WIRE)–#CSPR–Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, announces that a class action lawsuit has been filed in the United States District Court for the Southern District of New York on behalf of investors that purchased Casper Sleep, Inc. (NYSE: CSPR) securities pursuant and/or traceable to the Company’s February 7, 2020 initial public offering (the “IPO” or “Offering”). Investors have until August 18, 2020 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
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In the IPO, defendants sold 8.35 million shares of Casper common stock at $12 per share, generating over $100 million in gross proceeds. Shortly after the IPO, Casper announced downward gross margin trends and substantially impaired operations as a result of an increasingly dire cash flow situation
On April 21, 2020, Casper announced that it was taking significant actions to improve its cash position and business model, notwithstanding the fact that the Company had raised more than $100 million in gross offering proceeds from the IPO less than three months previously. The Company stated that it was reducing the size of its global operations and sales team and completely winding down its European operations, leading to the loss of 21% of its entire corporate workforce globally. These drastic measures were necessitated by the Company’s ballooning losses and deteriorating cash position. The Company also stated that defendant Macfarlane, the Company’s CFO and COO, was resigning – an extraordinary move so soon after the IPO.
Also on May 12, 2020, Casper filed its quarterly report on Form 10-Q in which it stated that its cash and cash equivalents had only increased $48.5 million during the quarter, despite the fact that the Company received over $88 million in net cash proceeds from the IPO. The Form 10-Q stated that during the quarter Casper had suffered over $40 million in negative cash flows from operating and investing activities. As the Company had only $116 million in cash on hand as of March 31, 2020, at this rate Casper was on track to run out of cash entirely within a year.
As of market close on June 19, 2020, Casper stock was trading at just $8.78 per share, over 26% below the IPO price.
The complaint, filed on June 22, 2020 alleges that the Offering Documents were 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 were not prepared in accordance with the rules and regulations governing their preparation. Specifically, the lawsuit claims the Offering Documents made false and/or misleading statements and/or failed to disclose that: (1) Casper’s profit margins were actually declining, rather than growing; (2) Casper was changing an important distribution partner, costing it 130 basis points of gross margin in the first quarter of 2020 alone; (3) 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; (4) Casper was suffering accelerating losses, further placing its ability to achieve positive cash flows and profitability out of reach; (5) 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; (6) as a result of the foregoing, Casper’s ability to achieve profitability, implement its growth initiatives, and expand internationally had been misrepresented in the Offering Documents, 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 (7) as a result of the foregoing, Casper’s revenue growth rate was not sustainable and had not positioned the Company to achieve profitability.
If you purchased Casper securities or pursuant and/or traceable to the IPO, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Melissa Fortunato or Marion Passmore by email at email@example.com, telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.
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Bragar Eagel & Squire, P.C. is a nationally recognized law firm with offices in New York and California. The firm represents individual and institutional investors in commercial, securities, derivative, and other complex litigation in state and federal courts across the country. For more information about the firm, please visit www.bespc.com. Attorney advertising. Prior results do not guarantee similar outcomes.