||United States District Court for the Northern District of California
||Susan Yvonne Illston
||September 22, 2021 and November 1, 2022
Freshworks investors may receive additional information about the case by clicking the link "Submit Your Information" above. If you are a member of the class described below, you may no later than January 3, 2023 move the Court to serve as lead plaintiff of the class, if you so choose.
A class action lawsuit has been filed on behalf of those who purchased or acquired Freshworks Inc. (“Freshworks”) (NASDAQ: FRSH) common stock pursuant and/or traceable to the Registration Statement and related Prospectus (collectively, the “Offering Documents”) issued in connection with Freshworks’ September 2021 initial public offering (the “IPO”).
Freshworks provides customer engagement software for businesses. On or about September 22, 2021, Freshworks conducted its IPO, offering 28.5 million shares of its common stock to the investing public at a price of $36 per share (the “Offering Price”). Freshworks anticipated generating gross proceeds of over $1 billion from the IPO.
According to the Offering Documents, Freshworks’ business had “grown rapidly” in the lead up to the IPO, with the company observing “broad appeal of [its] products to customers of all sizes and geographies.” As a result, the company’s growth rates and purportedly “healthy” net dollar retention rates, reflecting the usage of its products from existing customers and the sale of additional products to these customers, reached levels not previously achieved, and there was no indication that either was decelerating. Rather, the Offering Documents repeatedly and prominently touted Freshworks’ 118% net dollar retention rate for the period ended June 30, 2021, which represented a noteworthy increase from the 107%, 111%, and 112% net dollar retention rates achieved as of June 30, 2020, December 31, 2020 and March 31, 2021, respectively, as well as Freshworks’ year-over-year revenue growth rate of 53% (as of June 30, 2021), which likewise represented a significant increase over the company’s 45% year-over-year growth rate for the period ended December 31, 2020. Unbeknownst to investors, at the time of the IPO, Freshworks’ revenue growth and billings had encountered obstacles.
Freshworks’ stock declined after it announced its fourth fiscal quarter 2021 earnings on February 10, 2022, during which it reported flat calculated billings growth (of 41% when normalized for early renewals and reserve activity) and revenue growth deceleration of only 44% year over year. Following this news, Freshworks’ stock dropped 18%, closing on February 11, 2022 at $18.41 per share.
Then, on May 3, 2022, after the market closed, Freshworks reported its first quarter 2022 financial results, reporting a third quarter of decelerating revenue growth and billings that missed consensus estimates and declined 13% quarter over quarter. Many analysts immediately responded by reducing their price targets. For example, on May 4, 2022, after highlighting how Freshworks’ revenue growth has “decelerat[ed]” three consecutive quarters, including during the period within which Freshworks went public, Defendant JMP Securities LLC dropped its price target from $41 to $29. Following this news, on May 5, 2022, Freshworks closed at $15.99 per share, down approximately 5.72% over two days.
By the filing of the complaint, Freshworks’ shares traded as low as $10.51 per share, a decline of nearly 70% from the Offering Price.
The complaint against Freshworks alleges that the Offering Documents were negligently prepared and, as a result, contained untrue statements of material facts or omitted to state other facts necessary to make the statements made not misleading, and were not prepared in accordance with the rules and regulations governing their preparation. The Offering Documents omitted to state that, at the time of the IPO, Freshworks' net dollar retention rate had plateaued while its revenue growth rate and billings were, in fact, decelerating.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Filling out the online form above or communicating with any counsel is not necessary to participate or share in any recovery achieved in this case. Any member of the purported class may move the court to serve as a lead plaintiff through counsel of his/her choice, or may choose to do nothing and remain an inactive class member.
If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP: Jonathan Naji, Esq. (484) 270-1453 or via e-mail at email@example.com. If you would like additional information about the suit, please click on the link "Submit Your Information" above and fill out the form as promptly as possible.