SINGAPORE - Nasdaq-listed super-app Grab could face class action lawsuits, with several United States law firms calling for shareholders to contact them to investigate claims on their behalf.
The mounting of such investigations, which is fairly commonplace for listed firms in the US, comes after Grab's shares crashed last week, falling about 37 per cent on March 3 after it announced a fourth-quarter net loss of US$1.1 billion (S$1.5 billion).
Its results came amid a worse-than-expected drop in revenue, due to higher incentives being paid out to attract drivers and consumers.
Singapore-headquartered Grab's shares last closed at US$3.36 on Monday (March 7), a far cry from the US$13.06 it reached on the day of its listing last December.
At least eight law firms have announced their intention to investigate Grab for matters such as false and misleading statements, possible fraud and other violations of US federal securities laws.
Grab declined to comment when contacted by The Straits Times.
Professor Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore Business School, noted that listed firms in the US regularly face class action suits in a variety of matters, including possible violations of securities laws.
"In recent years, there are, in particular, class action suits against non-US issuers, especially those from China. The trend for class action suits is primarily driven by the permissibility of contingency fee arrangements, where the lawyer receives a pre-agreed percentage of the awarded damages," he said.
In addition, there are many law firms that specialise in class action suits for securities laws, and actively monitor unusual stock losses and seek shareholders who incurred significant damages to lead the suits, Prof Loh added.
In stock drop lawsuits, lawyers seize on a plunge in stock price as evidence that a company failed to be forthcoming about looming bad news.
Calls for investors to mount securities class action lawsuits are fairly common in the US, even if most cases do not make it to court.
Shareholder rights litigation company Schall Law Firm is also similarly focusing on whether Grab issued false and/or misleading statements or failed to disclose information pertinent to investors.
Securities litigation practice Pomerantz Law Firm, meanwhile, is investigating whether Grab and its officers and/or directors have engaged in securities fraud or unlawful business practices, it said in a release dated March 6.
Pomerantz had also last month called for shareholders of Sea to contact the firm, announcing its intent to investigate the Singapore-based tech giant for similar reasons. It is among a number of US law firms that regularly puts out calls for investors to contact them for investigation into listed firms.
According to statistics from Stanford Law School's Securities Class Action Clearinghouse database, 211 securities class action cases were filed in federal and state courts last year, lower than the 319 cases filed in 2020.
So far, this year, 35 cases have been filed.
The number of filings involving special purpose acquisition companies (Spacs) also rose significantly, in line with the rise of Spac-related mergers last year.
In class action suits, there are generally one or more lead plaintiffs, who represent the group of plaintiffs, or in the case of Grab, the group of investors. The lead plaintiffs are typically those with the largest losses and with the most incentive to get a higher settlement.
If a settlement is reached, the lawyers usually take a percentage of the settlement amount, with the lead plaintiffs next, and normally getting paid a higher share than other members, followed by the rest of the members of the class.
Prof Loh highlighted that Grab should always be ready to defend its actions and disclosure of information rigorously in the course of its business, and not just because of potential class action suits.
"The (firm's next) steps will have to depend on the specific contentions in each of the class action suits that may arise, but one thing is clear: there is certainly much gripe about the heavy share price drops after the Spac listing."