WEBTOON Entertainment Denies IPO Misrepresentation Claims in U.S. Court Filing

WEBTOON Entertainment has formally denied allegations that it misrepresented its business conditions during its Nasdaq initial public offering, according to a court filing submitted in the United States.

According to Korean business news outlet Seoul Economy, the response, filed on January 9 with the U.S. District Court for the Central District of California, marks the company’s first official defense since investors brought a shareholder class-action lawsuit against WEBTOON Entertainment in September 2024. In the January filing, the company rejected all claims that its registration statement submitted to the U.S. Securities and Exchange Commission contained false or misleading information.

WEBTOON Entertainment stated that, except for points it explicitly acknowledged, it “denies all allegations contained in the complaint.” Plaintiffs have argued that the company violated U.S. securities laws by presenting overly optimistic growth projections and failing to adequately disclose a decline in monthly active users (MAU) prior to the IPO.

The lawsuit also names nine IPO underwriters, including JPMorgan Chase and Goldman Sachs, all of which submitted separate filings echoing WEBTOON Entertainment’s position that the disclosures were lawful and not misleading.

With the submission of these answers, the case is now entering a substantive phase focused on factual disputes and liability. The lawsuit was filed after WEBTOON Entertainment’s share price fell to the low-US$10 range following its June 2024 Nasdaq listing, below its US$21 IPO price. Earlier stages of the case addressed procedural issues, including consolidation and dismissal motions.

Key issues going forward are expected to include whether a declining MAU trend existed at the time of the IPO and whether foreign exchange risks related to the Korean won should have been disclosed in greater detail. While the court recently declined to dismiss the case, citing the need for further examination of MAU and currency-related risks, WEBTOON has not issued a separate public statement regarding the litigation.

Source: Seoul Economy (Heung-rok Kim)