Blue Apron Holdings Inc (NYSE:APRN) Under Legal Pressure For Allegedly Misleading Investors

Blue Apron Holdings Inc (NYSE:APRN) has found itself in deep water after it was served with multiple class action suits filed by four legal firms including Bragar Eagel & Squire for allegedly misleading investors.

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The lawsuits filed by the four law firms claim that Blue Apron failed to disclose vital material information. They have accused the company of misrepresenting the challenges that it has been facing with customer retention, reduced ad spending and delayed orders. The company recently went public but then its stock tanked, thus leading to concerns by investors.

“Blue Apron had decided to significantly reduce spending on advertising in Q2 2017, hurting sales and profit margins in future quarters. Blue Apron was experiencing difficulty with customer retention due to orders not arriving on time or with all expected ingredients,” stated one of the legal complaints.

Blue Apron has also been accused of failing to do enough to redeem the performance of its tanking stock. The firm is also facing a huge threat from Amazon.com, Inc. (NASDAQ:AMZN) which recently acquired Whole Foods Market, Inc. (NASDAQ:WFM) to get into the food and groceries delivery business. However, the IPO investors had been given a heads up about Amazon’s approaching entry into the market.

Bragar Eagel & Squire is one of the law firms that filed a lawsuit against the company for failing to disclose vital information in its Pre-IPO filing. Blue Apron’s lawyers will have to prove that the company had issued significant notice about the problems mentioned in the lawsuits to the potential investors. However, it is also not uncommon for young and struggling firms to find themselves in legal battles revolving around the stock performance.

Kathleen Smith, an IPO ETFs manager at Renaissance Capital pointed out that lawyers have a tendency of bringing up such lawsuits when a company’s stock goes down. Social media giant Facebook Inc (NASDAQ:FB) also faced similar legal challenges after an unsuccessful IPO IN 2012. It is thus not an indication of doom for Blue Apron and there is still a lot that it can do to turn its fortunes around.

Blue Apron stock closed the latest trading session on Tuesday at $5.25.

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