[Alpha Biz= Paul Lee] Webtoon Entertainment, the Naver subsidiary overseeing its webtoon business, has officially denied claims that it engaged in fraudulent practices, including misrepresenting its financial condition during its Nasdaq IPO. The denial was submitted to the court in response to a shareholder class-action lawsuit filed by investors in September 2024, marking the company’s first formal response in the litigation.
According to U.S. legal sources on January 15, Webtoon Entertainment filed an answer on January 9 in the U.S. District Court for the Central District of California, stating that its securities filings with the U.S. Securities and Exchange Commission (SEC) contained no false or misleading information. The company denied each allegation in the plaintiffs’ complaint, except for matters it explicitly acknowledged. The company stated in the filing, “Defendants deny all allegations in the complaint except as expressly admitted herein.”
The plaintiffs had argued that Webtoon Entertainment violated U.S. securities laws by providing overly optimistic growth forecasts and failing to disclose a decline in monthly active users (MAU).
Nine underwriters of the IPO, including JPMorgan and Goldman Sachs, also submitted similar filings, asserting that the disclosures were lawful and accurate.
The case now moves into substantive proceedings where the facts and liabilities will be contested. The lawsuit stems from Webtoon Entertainment’s share price falling to the low $10s, well below the $21 IPO price, following its June 2024 Nasdaq listing. Prior procedural steps, including consolidation of cases and motions to dismiss, have already taken place.
Key issues for the court will likely include whether MAU had declined during the IPO period and whether currency exchange risks should have been disclosed in more detail. Last month, the court decided to continue the case, stating that these matters require further examination. Naver Webtoon has not issued a separate statement regarding the U.S. shareholder lawsuit.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
