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Competition 'Downplayed'

Investor Sues Instacart, Executives, Directors for Securities Act Violations

Instacart’s document offerings for its initial public offering in September were “negligently prepared” and contained “untrue” or “omitted” statements, plaintiff Andy Stephens claimed in a class action (docket 5:24-cv-00465) against Instacart and 11 executives and directors Thursday in U.S. District Court for Northern California in San Jose.

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Instacart filed an S-1 registration statement Aug. 25 in connection with the IPO, which, after several amendments, the SEC declared effective Sept.18; its stock began trading the next day at a $30 per share offering price, the complaint said.

The offering failed to disclose that Instacart overstated the extent to which consumers' online grocery shopping and delivery habits were accelerating, said the complaint. The offering also “downplayed" the competition Instacart faced in the online grocery shopping and delivery market. Moreover, it overstated its post-IPO growth, business and financial prospects, it said. The company’s public statements were “materially false and misleading at all relevant times.”

The complaint cited a Sept. 22 Reuters article saying Instacart’s stock price was falling after “lukewarm analyst reports.” It indicated the company would “struggle from heavy competition” in the “slowly expanding market of grocery delivery,” the complaint said. The stock fell 2% to close at $30 per share Sept. 22, the complaint said. Competitors cited in the article included DoorDash and Uber.

On Oct. 2, an analyst citing cautious consumer spending sentiment and a competitive environment gave Instacart a “hold” rating; the stock price fell 9% on the news, closing at $26.96 that day, the complaint said. Shares continued to trade below the $30 offer price when the complaint was filed, “damaging investors,” the complaint said. As a result of defendants’ "wrongful acts and omissions, and the precipitous decline in the market value of Instacart’s securities," Stephens and class members suffered "significant losses and damages."

During the Sept. 19-Oct. 1 class period, Instacart and CEO Fidji Simo had "both the motive and opportunity to commit fraud," the complaint said. They also had "actual knowledge of the misleading nature of the statements they made, or acted in reckless disregard of the true information known to them at the time," as part of fraud scheme, it said.

Stephens claims violations of Sections 11, 15 and 20(a) of the Securities Act. He seeks an order requiring defendants to pay damages sustained by him and the class, pre-judgment and post-judgment interest, plus attorneys’ fees and costs.