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Eventbrite investors settle lawsuit over shares drop

Shareholders negotiate a US$1.9 million settlement in lieu of a better pay-out down the line, due to impact of Covid-19

By IQ on 12 Aug 2020

Eventbrite's San Francisco HQ

Eventbrite investors negotiate a US$1.9 million settlement


image © Rapt Studio/Mariko Reed

Aggrieved Eventbrite investors have agreed to settle a lawsuit they filed against the ticketing company, given the current issues facing the live entertainment sector due to Covid-19.

Last year, the shareholders alleged that the company made misleading statements at the time of the company’s initial public offering (IPO) in September 2018, following the impact of the Ticketfly integration and subsequent decline in Eventbrite stock.

The lawsuit alleged that Eventbrite misled potential buyers in its IPO registration statement which declared that the acquisition of ticketing platform Ticketfly “had a positive impact” on net revenue growth” in the third quarter of 2017.

The claimants also stated that the company failed to disclose that, at the time of IPO, the Ticketfly migration was progressing more slowly than stated, therefore delaying integration and negatively impacting growth.

The claimants purchased Eventbrite stock in the company’s IPO at US$23 a share which started declining on 7 March 2019, upon the release of Eventbrite’s annual financial results and the admission that the Ticketfly integration “will impact revenues in the short-term”. The share price continued to drop.

“With the company’s future uncertain, the prospect that settlement class members would recover anything looked dim”

The investors filed for damages with a class-action lawsuit but have recently negotiated a $1.9 million settlement, noting that the challenges faced by Eventbrite as a result of Covid-19 reduced the prospect of a better pay-out down the line, according to Law360.

They also noted that similar litigation against Eventbrite in the Californian state courts had also been dismissed, reducing chances of winning the lawsuit.

Their legal counsel told the judge: “Dimming the prospects of any recovery, during litigation, the world was struck by the worst pandemic it suffered since 1918 – particularly bad news for a company whose business is helping customers plan live events”.

“With claims against Eventbrite dismissed in state and federal court”, they went on, “and the company’s future uncertain, the prospect that settlement class members would recover anything looked dim. Yet, lead counsel nonetheless were able to negotiate the $1.9 million settlement”.

And while a lower sum than originally hoped, that cash “will nonetheless prove meaningful for settlement class members”.

Eventbrite recently released its earnings report for the second fiscal quarter of 2020, with net revenue for the period dropping more than 90%.  The report also revealed that the company’s net revenue was just $8.4 million for the quarter, down from $80.8 million in Q2 2019.

For the same period, Eventbrite chalked up a $38.6 million net loss, up sharply from the $14.8 million loss from the previous year. Eventbrite also reported that their advanced payout balance is now $244 million, reduced by $111 million since March.

 


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