Freshworks is purportedly being sued for deceiving a US market regulator
- ByStartupStory | November 4, 2022
A class action complaint has been filed against the US- and India-based SaaS company Freshworks in a California district court for allegedly issuing deceptive offering documents before the company’s September 2021 listing on the Nasdaq stock exchange.
The Securities and Exchange Commission (SECregistration )’s statement and prospectus for Freshworks, according to a US law firm named Scott+Scott Attorneys at Law LLP, “contained materially incorrect or misleading statements and/or omitted material information that was required by law to be disclosed.”
The lawsuit further claims that despite Freshworks’ claims that its business “had developed fast” before to going public and that “clients of all sizes and geographies” had shown a strong interest in its products, the company’s revenue growth and billings had encountered challenges.
The lawsuit claimed that Freshworks’ net dollar retention rate had plateaued at the time of the Offering, despite the fact that its revenue growth rate and billings were actually slowing down. “The Offering Documents were false and deceptive,” it said. Any investor who has lost more than $100,000 has been encouraged by the law firm to seek to join the class action.
A representative for Freshworks said, “We don’t comment on current litigation and expect to fiercely defend this and any comparable claims. Freshworks offers solutions for marketing, sales, support, and IT. It was founded in 2010 by Girish Mathrubootham, Shan Krishnasamy, and Vijay Shankar. The business contends with rivals like Salesforce, Zendesk, and Zoho, among others.
Following a $1 billion IPO, Freshworks became the first software business of Indian descent to be listed on the Nasdaq in September 2021. Freshworks saw a 21% increase on its first day of trading, with shares beginning at $43.50 each as opposed to the IPO price of $36. Freshworks’ stock has since fallen, closing at $12.24 on November 2.
Freshworks also revealed its third quarter’s financial figures on Wednesday, which ended on September 30, 2022. While operating losses were $3.1 million, the company’s overall sales increased by 37% to $128 million.
CEO and co-founder Mathrubootham stated in a statement, “We had a good quarter of results with sales rising 37% on a constant currency basis and significantly improved our operating efficiency. Freshworks anticipates a sales growth of between 27% and 28% for the fourth quarter. It plans to increase revenue by up to 34% overall in 2022.
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