ContextLogic Inc. ContextLogic Inc.

A securities class action has been filed against ContextLogic Inc. (WISH) on behalf of all purchasers of the common stock of ContextLogic pursuant or traceable to the Registration Statement and Prospectus issued in connection with ContextLogic’s December 16, 2020 initial public stock offering (“IPO”), and open-market purchasers of ContextLogic common stock between December 16, 2020 through May 12, 2021.  This case has been filed in the USDC – N.D.CA.

The Complaint alleges that on December 16, 2020, ContextLogic completed its IPO in which it issued and sold 46 million shares of its Class A common stock at $24 per share, raising more than $1.1 billion in proceeds.  In the IPO Registration Statement, ContextLogic repeatedly claimed to have had 108 million MAUs as of September 30, 2020, the end of the last interim quarter prior to its IPO. It stated there that it “defme[d] MAUs as the number of unique users that visited the Wish platform, either on [its] mobile app, mobile web, or on a desktop, during the month,” emphasizing the materiality of the metric to investors by stating: “We view the number of MAUs as key driver of revenue growth as well as a key indicator of user engagement and awareness of our brand.”

Yet when ContextLogic reported its fourth quarter and fiscal year 2020 financial results for the period ended December 31, 2020 (“4Q20” and “FY20”) on March 8, 2021, it disclosed that in reality, by the time of its December 2020 IPO, its MAUs had already “declined 10% YoY during Q4 to 104 million, primarily in some emerging markets outside of Europe and North America where Wish temporarily de-emphasized advertising and customer acquisition as the company worked through logistics challenges it faced earlier in the year.”

On this news, the market price of ContextLogic common stock declined on March 8, closing down more than 10% at $15.94 per share on unusually high trading volume of more than 10 million shares trading. Yet the market price of ContextLogic common stock remained artificially inflated based on the Company’s statements that day about its continued strong demand and its providing first quarter 2021 (“1Q21”) sales guidance of $735 to $750 million, representing yearover-year growth of 67% to 70%.

Then on May 12, 2020, when ContextLogic announced 1Q21 financial results for the interim period ended March 31, 2021, it disclosed that its MAUs had declined another 7% to just 101 3 million.   The Company’s forward sales guidance also fell short, with its second quarter 2021 4 (“2Q21”) revenue guidance ofjust $715 million to $730 million coming in significantly less than the 5 $759 million the market had been led to expect and far less than the guidance of $735 to $750 million provided for 1Q21.

On this news, the market price of ContextLogic common stock declined $3.36 per share, or 29%, to close at $8.11 per share on May 13, 2021, on even more unusually high trading volume of more than 42 million shares trading, or more than 7 times the average daily volume over the preceding 10 trading days.