The Honest Company (HNST) $27.5M Investor Settlement
The Honest Company ($HNST) has agreed to settle $27.5M with investors over claims that it misled them about the demand for its products and financial risks at the time of its 2021 IPO.
Outline
In 2021, The Honest Company reported disappointing Q2 earnings. After that, the company was accused of failing to disclose major risks associated with its inventory build-up and product launches in its IPO filings. Following this, $HNST dropped 28%, and The Honest faced a lawsuit from investors.
Timeline
May 5, 2021 – The Honest Company completed its $412M IPO, emphasizing strong growth and an “omnichannel” sales strategy.
August 19, 2021 – The company reported weak Q2 earnings, blaming lower sales on leftover stock from the pandemic and poor response to its new diaper line, causing $HNST to drop 28%.
September 15, 2021 – Investors filed a lawsuit, alleging Honest misrepresented demand and failed to disclose key financial risks in its IPO prospectus.
December 23, 2024 – Honest accepted to settle claims for $27.5 million.
Background
In May 2021, The Honest Company launched a $412 million IPO, promoting strong consumer demand, a balanced growth strategy, and the rollout of its new “clean conscious diaper” line. The company emphasized momentum in its diapers and wipes segment, which accounted for nearly two-thirds of total revenue at the time.
However, Honest allegedly failed to disclose that demand had been temporarily inflated by COVID-related stockpiling and that the new diaper design received negative consumer feedback. Internally, executives had already identified slowing sales, market saturation, and increased competition.
On August 13, 2021, Honest reported disappointing Q2 results, citing post-pandemic demand declines and poor reception to its new diaper line. The company also disclosed a sharp revenue drop in its diapers and wipes category, contrary to the growth narrative shared at IPO.
Following the announcement, $HNST fell 28%.
On September 15, 2021, shareholders filed a claim against The Honest Company.
What Can Investors Expect Now?
The Honest Company ($HNST) has agreed to settle $27.5M with investors over claims that it misled them about the demand for its products and financial risks at the time of its 2021 IPO.
If you were damaged due to this situation, you can file for a payout and get your share of the settlement. You can check if you are eligible and other details in the FAQ section below.
Frequently Asked Questions
All persons who purchased or otherwise acquired The Honest Company’s publicly traded common stock pursuant and/or traceable to the Offering Documents for Honest’s Initial Public Offering prior to August 19, 2021, and were damaged thereby.
No, if you have purchased securities within the class period, you are eligible to participate.
You can participate in the settlement and retain (or sell) your securities.
The entire process usually takes 4 to 9 months after the claim deadline. But the exact timing depends on the court and settlement administration.
The final payout amount depends on your specific trades and the number of investors participating in the settlement.
If 100% of investors file their claims - the average payout will be $0.41 per share. Although typically only 25% of investors file claims, in this case, the average recovery will be $1.64 per share.
11thestate is an investor recovery company, we help investors to track and collect securities class action settlements. We will:
1. Prepare documents for your payout
2. Audit the claim and make sure you get the maximum possible payout
3. File a claim with the settlement administration
4. Correspond with the settlement administration to resolve emerging issues
5. Deliver payout directly to your brokerage account
There is no upfront cost, but we will deduct 20% of the recovered amount as a commission for our services.