Pomerantz Appointed Lead Counsel in Casper Sleep Securities Litigation
On August 27, 2020, U.S. District Judge Margo K. Brodie of the Eastern District of New York appointed Pomerantz LLP as Lead Counsel on behalf of Lead Plaintiff Saleh Doron Gahtan in Lematta v. Casper Sleep, Inc. et al. (No. 1:20-cv-02744-MKB-RML (E.D.N.Y.)). This securities litigation class action concerns allegations that Casper Sleep, Inc. (“Casper” or the “Company”) failed to disclose adverse facts that existed at the time of its IPO.
Casper sells mattresses, sleep aids and other sleep-related products and services. The Company is incorporated in Delaware, headquartered in New York and its shares trade on the New York Stock Exchange under the ticker symbol “CSPR.”
The complaint alleges that the offering documents issued in connection with the IPO (the “Offering Documents”) were negligently prepared, contained untrue and misleading statements of material fact and were not prepared in accordance with the rules and regulations governing offering documents preparation. Specifically, it is alleged that the Company failed to disclose in the Offering Documents that: (i) Casper's profit margins were actually declining, rather than growing, and its core operations were not profitable; (ii) the Company’s gross margin was being negatively impacted by the loss of a key distribution partner; (iii) the Company held a significant amount of outdated mattress inventory that it was selling at steeply discounted clearance prices, further impairing the Company’s profitability; (iv) and, as a result of the foregoing, the Company’s ability to achieve profitability, sustain its revenue growth rate, implement its growth initiatives and expand internationally had been misrepresented in the Offering Documents.
On May 12, 2020, Casper issued a press release providing its financial results for the quarter ended March 31, 2020. The Company stated that it had suffered a net loss of $34.5 million, a 98% increase year-over-year, and a loss in adjusted earnings before interest, tax, depreciation and amortization of $22.9 million, a 60% increase year-over-year. That same day, Casper filed its quarterly report with the U.S. Securities and Exchange Commission on Form 10-Q in which it stated that its cash and cash equivalents had only increased $48.5 million during the quarter, despite the fact that the Company received over $88 million in net cash proceeds from the IPO. On this news, Casper’s share price fell $1.53 per share, or 19.3%, to close at $6.37 per share on May 12, 2020.
As of market close on June 4, 2020, Casper’s stock was trading at just $8.18 per share, 32% below the Company’s $12 per share IPO price on February 7, 2020.
Pomerantz’s litigation team is led by Louis C. Ludwig.