A federal securities class action lawsuit has been initiated against Starbucks, alleging that the company misled investors with false statements about its Reinvention strategy.
The lawsuit, filed in the U.S. District Court Western District of Washington, targets investors who bought Starbucks stock between November 2, 2023, and April 30, 2024. It claims that the company's optimistic projections regarding its growth and strategy, particularly its plans for expansion outside the U.S., inflated stock prices and led to financial losses when these projections failed to materialize.
The legal action follows a significant drop in Starbucks' stock price after the company reported disappointing fiscal Q2 2024 results. The report revealed a 4% decline in global same-store sales and a 7% decrease in traffic, which led to a sharp 15% fall in the stock price from $88.49 to $74.55 in a single day. This decline followed the company's failure to meet its growth expectations, which were previously communicated to investors as part of its strategic plan.
The lawsuit specifically names former CEO Laxman Narasimhan and CFO Rachel Ruggeri, accusing them of disseminating misleading information while being aware of the adverse facts. The plaintiff seeks to recover losses incurred due to these alleged misrepresentations.
Starbucks has responded to the lawsuit, asserting that it consistently strives to communicate transparently and honestly with its investors and other stakeholders.
The company has also faced criticism from former CEO Howard Schultz and activist investor Elliot Investment Management, which has pressured Starbucks to improve its guest experience and operational performance. The recent leadership change, with Brian Niccol set to take over as CEO, is expected to address these challenges and restore investor confidence.
The lawsuit, filed in the U.S. District Court Western District of Washington, targets investors who bought Starbucks stock between November 2, 2023, and April 30, 2024. It claims that the company's optimistic projections regarding its growth and strategy, particularly its plans for expansion outside the U.S., inflated stock prices and led to financial losses when these projections failed to materialize.
The legal action follows a significant drop in Starbucks' stock price after the company reported disappointing fiscal Q2 2024 results. The report revealed a 4% decline in global same-store sales and a 7% decrease in traffic, which led to a sharp 15% fall in the stock price from $88.49 to $74.55 in a single day. This decline followed the company's failure to meet its growth expectations, which were previously communicated to investors as part of its strategic plan.
The lawsuit specifically names former CEO Laxman Narasimhan and CFO Rachel Ruggeri, accusing them of disseminating misleading information while being aware of the adverse facts. The plaintiff seeks to recover losses incurred due to these alleged misrepresentations.
Starbucks has responded to the lawsuit, asserting that it consistently strives to communicate transparently and honestly with its investors and other stakeholders.
The company has also faced criticism from former CEO Howard Schultz and activist investor Elliot Investment Management, which has pressured Starbucks to improve its guest experience and operational performance. The recent leadership change, with Brian Niccol set to take over as CEO, is expected to address these challenges and restore investor confidence.