- Snapchat’s parent company Snap says that it agreed to a $187.5 million settlement in a class action lawsuit brought against the company by investors following its IPO in 2017.
- The agreement was signed in January, the company said in its quarterly earnings statement on Tuesday.
- Investors had sued the company over allegations of failing to properly warn them ahead of its IPO about the competition that Snapchat faced from Facebook-owned Instagram.
- Snap faced an investigation from the US Department of Justice and the Securities and Exchange Commission over the matter, but it was dropped in late 2019.
- The company took a $100 million expense for the settlement in its earnings statement, with the balance of the settlement apparently covered by Snap’s insurance.
- Visit Business Insider’s homepage for more stories.
Snap, Snapchat’s parent company, said Tuesday that it had signed a preliminary agreement to pay $187.5 million to settle a class action lawsuit filed against the company in 2017 by investors following its initial public offering.
Snap had signed a preliminary deal to settle the case in January, as previously reported by Law360.
However, when Snap reported quarterly earnings on Tuesday evening, it also shared the financial details of the settlement for the first time. Judging from the language Snap used in describing it, it seems that the settlement is awaiting court approval to finalize.
Notably, Snap said in its earnings report that it had “recorded legal settlement expense, net of amounts directly covered by insurance, of $100.0 million,” seeming to indicate that the company expects to pay a little over half of the proposed settlement out of pocket, with the balance paid for by insurance.
Several investors brought the suit against Snap in 2017, in the wake of its tumultuous IPO. They alleged that Snap had concealed negative information ahead of going public about competition Snapchat faced from Facebook-owned Instagram.
The class action lawsuit, which has involved several different plaintiffs in its convoluted history, eventually prompted the US Department of Justice and the Securities and Exchange Commission to look into Snap’s pre-IPO disclosures, though the agencies eventually dropped the case late last year.
Snap has struggled on the public markets since it went public in March 2017, hovering just shy of $17 a share in after-hours trading Tuesday — right around its IPO price of $17.
After a poorly-received redesign in 2018 triggered a sell-off, Snap rebounded last year largely thanks to the popularity of its augmented reality lenses. Snap missed Wall Street’s revenue expectations in its fourth-quarter, but handily beat earnings per share predictions and added roughly 8 million new users.
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