Allbirds Sued Over ‘Misleading’ IPO

An Allbirds shareholder’s class action lawsuit accuses the Bay Area company of making statements that were false or misleading to investors when it went public in late 2021.

Plaintiff Gennady Shnayder filed the lawsuit on April 13 on behalf of himself and others who also bought stock in the brand, alleging that Allbirds’ initial public offering (IPO) with the Securities and Exchange Commission (SEC) omitted key details regarding future plans.

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The complaint claims Allbirds’ SEC registration statement failed to disclose that it was promoting products beyond its core offerings, like the popular Dasher and Runner sneakers, made from wool and cellulosic fibers. The suit said that the company was underinvesting in bestselling products to push new designs, which hurt Allbirds’ sales. This contrasted with what Allbirds laid out in its IPO statement, which said it planned to use the IPO proceeds for “general corporate purposes, including working capital, operating expenses and capital expenditures,” according to the complaint, which also names Allbirds co-CEOs Tim Brown and Joey Zwillinger, along with several banks involved with the IPO, as defendants.

The plaintiff took action after Allbirds on March 9 reported a $24.9 million net loss in Q4 2022, and a full year loss of $101.4 million. The company’s adjusted EBITDA loss reached $60.4 million during the 2022 fiscal year—higher than its estimated adjusted EBITDA loss of $42.5 million to $37.5 million. The company also announced that chief financial officer Michael Bufano was leaving.

Zwillinger said Allbirds “overemphasized products that extended beyond our core DNA” throughout 2022, and “some products and colors have had narrower appeal than expected.” The company spent significant time and resources on products that didn’t fully pan out, leading to an underinvestment in “core consumers’ favorite products,” he added. Allbirds’ stock price fell 47 percent to $1.25 one day after the March 9 earnings call, far from its $15-per-share IPO opening price.

Allbirds said it created a “strategic transformation plan to reignite growth, improve costs and capital efficiency, and drive profitability,” which included “reigniting” the product and brand, slowing the pace of store openings while optimizing existing brick-and-mortar, reevaluating its international strategy, and improving cost savings and capital efficiency.

The company is sticking with its sustainability agenda. Allbirds said it is on track to eliminate carbon emissions by 2030 in its latest “Flight Status” impact report, pointing to its largest year-over-year emissions reduction to date in fiscal 2022. Earlier this year, it revealed the net-zero-carbon M0.0NSHOT sneaker made with regenerative wool and bioplastic trims, and and updated sugarcane-based foam midsole.

Allbirds opened a second headquarters in Portland last year to attract design and development personnel from the Oregon talent pool home to Nike and Adidas.

Allbirds did not immediately respond to requests for comments.

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