According to recently-filed court documents, King Digital Entertainment PLC KING 1.77% and underwriters of its IPO, including JPMorgan Chase & Co. JPM 0.02%, Bank of America Corp BAC 0.75% and Credit Suisse Group AG CS 1.24%, will be defendants in a new lawsuit centered on disclosure of accurate user numbers prior to King Digital’s IPO last year.
The documents, which were filed in California Superior Court and obtained by Mashable, allege that King Digital deliberately hid a significant decline in user numbers prior to its IPO.
The Claim
The lawsuit was filed by King Digital investors Sean Debotte and Michael Nunes.
According to the lawsuit, claims made in King Digitals’s pre-IPO prospectus, including claims of 97 million active users who played 1.065 billion daily games of Candy Crush, were “materially inaccurate, misleading, and/or incomplete.”
At the time of the IPO, Candy Crush accounted for nearly 80 percent of the company’s business.
Insiders ‘Cashing Out’?
King Digital priced its IPO at $22.50.
About a year later, IPO shares have now lost a third of their value. The stock took a big hit in May of last year when King Digital announced that monthly paying customer numbers had fallen from 12.2 million in 4Q13 to 11.9 million in 1Q14. According to the lawsuit, King digital executives and financial backers cashed out millions of dollars following the IPO.
King Digital Responds
King Digital believes that the accusations are unfounded. “We believe the claims are without merit and intend to defend them vigorously,” a King spokesperson said of the lawsuit.
King shareholders seemed to have shrugged off the news, as the share price has shown little reaction.
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