Shareholder rights firms file class action suits against Freshworks

A securities class action suit allows shareholders to collectively litigate against a company for causing ‘economic injury’ by violating certain securities laws, and allows for monetary compensation.

The Scott + Scott statement said Freshworks’ offering documents at the time of IPO were “false and misleading” and omitted to inform that the company’s business had encountered obstacles. The statement, referring to a complaint filed in California, northern district, US, said the securities class action suit has been filed against Freshworks, and certain directors, officers at the company and underwriters of the September 2021 IPO. The Schall Law firm encouraged investors to get in touch with the firm before January 2023.

An email sent to Freshworks about the securities class action suit did not elicit an immediate response.

“Freshworks’ net dollar retention rate was plateauing, and its revenue growth rate and billings were decelerating. As the truth about the company’s business reached the market, the value of its shares declined dramatically, causing Freshworks investors to suffer significant damages,” Scott + Scott said in the November 1 note put up on its website. The class period—referring to the timeframe when the alleged shareholder wealth erosion occurred—has been fixed between listing date in September 2021 and January 11, 2022.

Freshworks listed 28.5 million common stocks to the investing public at a price of $36 a piece. The company raised $1.03 billion through the IPO at a market capitalisation of $10.3 billion, but the share value has, since then, eroded. On Nasdaq as of latest close, the Freshworks stock stood at $12.66 a piece, with a market cap of $3.6 billion. Its 52-week high stands at $53.35.

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Freshworks, which went public in September 2021, is the second Indian origin technology company after Webex to list on the Nasdaq. Founded by former Zoho executives Girish Mathrubootham and Shan Krishnasamy, Freshworks has guided that its revenue would be in the range of $494-496 million in the current year.