NEW YORK (Reuters) – The U.S. Justice Department and Securities and Exchange Commission have subpoenaed Snap Inc (SNAP.N) for information about its March 2017 initial public offering, the social media app maker told Reuters on Tuesday.
A man takes a photograph of the front of the New York Stock Exchange (NYSE) with a Snap Inc. logo hung on the front of it shortly before the company’s IPO in New York, U.S., March 2, 2017. REUTERS/Lucas Jackson
Snap said in a statement it has responded to the government subpoenas and other requests for information.
The previously unreported federal inquiries follow an ongoing shareholder lawsuit in which investors allege that Snap misled the public about how competition from Facebook Inc’s (FB.O) Instagram service had affected the company’s growth.
Snap said it believes that the federal regulators “are investigating issues related to the previously disclosed allegations asserted in the class action about our IPO disclosures.”
It continued, “While we do not have complete visibility into these investigations, our understanding is that the DOJ is likely focused on IPO disclosures relating to competition from Instagram.”
Snap’s Snapchat messaging app has struggled with user growth since the IPO, and despite above-expectations sales growth and narrowing losses, its shares have tumbled. They closed at $6.71 on Tuesday, down from their initial offering price of $17.
The company described the lawsuit as “meritless” and its pre-IPO disclosures as “accurate and complete.” It said it would continue to cooperate with the SEC and Justice Department.
Snap acknowledged the probes after the U.S. government made a sealed filing in the lawsuit last Wednesday.
The lawsuit, filed in May 2017 in U.S. District Court in Los Angeles, also alleges that Snap did not disclose a sealed lawsuit brought before the IPO in which a former employee alleged the company had misrepresented some user metrics.
Judge Stephen V. Wilson in June denied Snap’s motion to dismiss the case.
Reporting by Alison Frankel in New York; Additional reporting by Paresh Dave in San Francisco; Editing by Cynthia Osterman