Elf Beauty to face class action lawsuit over ‘misleading’ inventory and sales figures

THE WHAT? Elf Beauty could be forced to defend itself in a class action lawsuit which has been filed against the cosmetics brand in the District Court of Northern California and seeks to recover damages allegedly caused by Elf Beauty’s violations of federal securities law.

THE DETAILS Indeed, the suit charges Elf with concealing growth concerns as a result of rising inventory levels from investors, making materially false and misleading statements regarding its business, operations and prospects.

A report published by Muddy Waters Research accuses the Company of concealing its inventory challenges from investors by falsely attributing its rising inventory levels to supposed changes in its sourcing practices rather than the true cause—insufficient sales.

THE WHY? Elf’s share price dropped US$2.71 per share immediately following the publication of Muddy Waters’ report, and has continued to fall, closing on March 5 at US$64.67 per share, down US$57.04 per share since the inventory management and revenue discrepancies were highlighted. The suit seeks to recover these losses for investors.

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