(CN) – Yoga instruction company YogaWorks is under fire from shareholders for allegedly making false claims in filings with the Securities and Exchange Commission tied to the company’s initial public offering.
The action filed in California Superior Court by lead plaintiff Rubina Mirza, who claims YogaWorks represents itself as “one of the largest and fastest growing providers of yoga instruction in the U.S.,” with as many as 66 company-owned studios.
“While YogaWorks touted its expertise, experience, and method of acquiring and integrating profitable yoga studios in the Offering Materials as the basis for achieving its aggressive growth target of 250 studios and higher gross margins in the near term, unbeknownst to investors, YogaWorks had been experiencing declining student visits, class sizes, and lower revenue per studio,” the complaint states.
Despite the dwindling clients and revenue, YogaWorks allegedly still represented itself as a growing company. Their initial offering of 7.3 million shares raked in $40.15 million in gross proceeds at the going rate of $5.50 per share.
The class claims that YogaWorks’ stock consistently traded lower than $5.50 per share, due to the diminished outlook of the company’s financial prospects and that YogaWorks’ misrepresentation inflated their value.
YogaWorks also explained away low revenues for the first quarter of 2017, blaming “pricing strategies,” rather than disclosing that fewer students were visiting the company’s studios.
Shareholders are represented by Rosanne L. Mah, Shannon L. Hopkins and Sebastiano Tornatore of Levi & Korsinsky LLP in San Francisco and Stamford, CT. and Marrion C. Passmore of Brager Eagel & Squire in New York.