The Honest Company, Inc.

On May 6, 2021, Honest completed its IPO, selling approximately 26 million shares of common stock for $16.00 per share.

Approximately two months after the IPO, on August 13, 2021, before the market opened, Honest announced its second quarter 2021 financial results, reporting a net loss of $20 million, compared to a net loss of only $0.4 million for the second quarter of 2020. Honest disclosed that its revenue grew only 3% as compared to the second quarter of 2020, because it was negatively impacted by “an estimated $3.7 million COVID-19 stock-up impact primarily in Diapers and Wipes in the prior year period.” Honest also disclosed that its Diapers and Wipes category revenue declined 2% compared to the second quarter of 2020. Honest further disclosed that “Household and Wellness revenue declined 6% from the second quarter of 2020 as consumer and customer demand for sanitization products decreased as consumers became vaccinated and customers managed heavy levels of inventory.”

On this news, the Company’s stock price fell $3.98 per share, or 28%, to close at $10.07 per share on August 13, 2021, on unusually heavy trading volume.

On August 19, 2021, the Company’s stock price closed at an all-time low of $9.16 per share, a nearly 43% decline from the $16.00 per share IPO price.

The Registration Statement was materially false and misleading and omitted: (1) 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; (2) that, at the time of the IPO, the Company was experiencing decelerating demand for such products; (3) that, as a result, the Company’s financial results would likely be adversely impacted; and (4) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects, were materially misleading and/or lacked a reasonable basis.