On September 10, an investor filed a class action lawsuit against WEBTOON Entertainment Inc.th. The lawsuit alleges that popular South Korean online comics platform Webtoon misled investors during its initial public offering (IPO). Several law firms are currently investigating whether the claim is reasonable.
Webtoon becomes a publicly traded stock on June 27th this year. The shares sold for $21.00, and the company reported that they raised approximately $308.5 million through the sale. Opening a pop-up store in Times Square is a big deal. When a company goes public, their initial financial reports seem impressive and the company is growing.
However, in August, shortly after the IPO closed, the company reported second-quarter 2024 financial results. Based on those statements, the company reported $320 million in revenue and hasn’t grown much since the IPO. The company blamed falling advertising revenue and weak foreign exchange. Bear Stearns reported these losses at the time, and they seemed normal. As of September 11ththe stock closed at $10.37, indicating further declines in the company’s stock price.
However, the lawsuit accuses Webtoon of misleading investors in its IPO registration statement. According to the SEC website, a registration statement is a document in which
“Companies must clearly describe material information about their business operations, financial condition, results of operations, risk factors and management.”
The registration statement provided by the company ignored the risks of weak advertising revenue, decelerating IPOs and depreciating foreign currencies. Therefore, investors may be misled about the viability of Webtoon’s IPO.
At this time, the lawsuit only asserts claims. Several law firms have called on shareholders to report any concerns before November 4th. At that time, more information should be provided or possible legal action should be taken. The Beat will continue to follow this story as it develops.
Special thanks to Beat contributor Justin Guerrero for his help and background on this article
