Angry Shareholders Add to TrueCar’s Woes

     (CN) – TrueCar misrepresented the automotive-pricing website’s growth outlook in going public last year, shareholders claim in court, noting that share prices have fallen 76 percent from a January high.
     Ning Shen and William Fitzpatrick are the lead plaintiffs in the class action filed Tuesday in Los Angeles County Superior Court against TrueCar, CEO Scott Painter, 10 of the company’s directors, and its IPO underwriters. The complaint is the Top Download for Courthouse News today.
     An auto-pricing and information website for new and used cars, TrueCar lets buyers see what others paid for a certain make and model of car. It also connects buyers to auto dealers within its network.
     The Santa Monica-based company made its highly anticipated initial public offering in May 2014, pricing shares at $9 per share, which was below analysts’ expected price. The IPO raised approximately $70 million.
     Though TrueCar shares reached a high of $25 per share in early 2015, they quickly lost value as the company became embroiled in litigation with auto traders over alleged noncompliance with California and New York laws.
     The company’s shares have fallen 76 percent this year, and 46 percent in the last four weeks on an abysmal second-quarter earnings report.
     It traded Thursday at $5.64 per share, and Painter announced Monday that he will be stepping down as CEO.
     The class action filed Tuesday accuses the defendants of having “negligently issued false and misleading statements and omitted material facts from the [IPO] registration statements and incorporated offering materials that the company filed with the SEC in support of the offering.”
     Specifically, TrueCar failed to tell investors that its “business practices violated unfair competition and deceptive trade practice laws because TrueCar acts as a dealer and broker in car sales transactions without proper licensing, in violation of the laws of a number of states,” according to the complaint.
     Saying TrueCar knew at the time of its IPO that its outstanding growth in prior years was based on “unsustainable and, in effect, unprofitable levels of sales and marketing expenses,” the shareholders claim that the company failed to disclose this fact in its offering statements.
     The shareholders seek damages for violations of the Securities Act.
     They are represented by Lion Glancy with Glancy, Prongay & Murray.
     TrueCar spokeswoman Carly Schaffner said the company has no comment at this time.

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