Jessica Alba’s Honest Co. bath products and baby needs company has been sued as part of a class-action lawsuit. The suit alleged that the company lied to investors about a massive dip in sales during the Covid-19 pandemic.
The lawsuit claimed that many investors bought stock in May in Honest Co. when the company went public, due to the exceptional numbers that the health and wellness company posted in 2020 during the pandemic. However, two months after the company went public, Honest Co. reported a net loss of over $20 million, with stock prices plummeting to nearly 43% from the original offering price.
The lawsuit alleged that Honest Co. misled investors by failing to inform them that revenue dropped after the demand for diapers, wipes, and other sanitation products significantly decreased once customers were fully stocked up for the pandemic. Glancy Prongay & Murray LLP, the law firm issuing the suit, also claimed that the demand for these products decreased as people became vaccinated and that the company withheld that information until after going public.
“The Registration Statement was materially false and misleading and omitted that, prior to the IPO, the Company’s results had been significantly impacted by a multimillion-dollar Covid-19 stock-up for products in the Diapers and Wipes category and Household and Wellness category,” the class-action suit read.
As a result, “positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.”
The Shareholders conceded that they were made aware that numbers seen during the pandemic were not guaranteed to continue until 2021. They said that they had every reason to believe that Honest Co. was doing well at the time of the IPO. and were misled.
Over the past two years, Jessica Alba has also appeared on the television show L.A.’s Finest, alongside Gabrielle Union.
In 2017, the company was hit with multiple class-action lawsuits over misleading advertising and claims that her products were “100% natural.” The wellness brand’s laundry detergents were later revealed to contain sodium lauryl sulfate, a chemical foaming agent, despite Alba claiming otherwise in an advertisement.
“I love facts and data,” Jessica Alba told People recently in an interview after Honest Co. went public. “So whenever there’s a naysayer with a laundry list of why everything shouldn’t happen, I love asking questions. ‘Oh really? Why couldn’t this work?’ And then you collect all the data that you need to come in and hit them over the head with it.”
“If you deliver it with a smile, it’s just facts,” she said at the time.
The company ended up paying $1.55 million to settle the 2017 class-action suit but continued to deny any wrongdoing.
“We know that there is an unprecedented amount of attention in both our company and our products and unlike many other companies, we live out every single moment in the press,” Honest Co. told CNN at the time. “We have teams in place that work closely with all of our partners to ensure that every part of the manufacturing process lives up to Honest standards.”
In 2015, Honest Co. settled another lawsuit with a customer who claimed that the “natural” sunscreen they sold didn’t work, and in April 2016, the Organic Consumers Association filed a suit that alleged their baby formula contained ingredients that are not organic at all.
Investors have 60 days to respond to the lawsuit in what is expected to be a financial upheaval for Honest Co.