This shareholder derivative action is brought on behalf of nominal defendant Celsius Holdings, Inc. (“Celsius” or the “Company”), against members of the Company’s Board of Directors (the “Board”) and certain Company executives for breach of their fiduciary duties from at least August 12, 2021 through March 1, 2022 (the “Relevant Period”).
As alleged in the complaint, the Company has reported massive revenue growth in recent years, growing by 43%, 74%, and 140% in the years 2019, 2020, and 2021, respectively. In 2021, the Company reported revenue growing from $50 million in the first quarter, to $65 million in the second quarter, and $94.9 million in the third quarter, which resulted in attention from investors and analysts and an increase in stock price.
Celsius’ profits, however, failed to grow in step. Despite the massive revenue growth – nearly doubling from $28.1 million in the first quarter 2020 to $50 million in the first quarter 2021, then nearly doubling again to $94.9 million in the third quarter – the Company’s profits, as measured by net income and net income per share, remained relatively stagnant. For instance, net income grew to just $585,424 in the first quarter of 2021 compared to $546,051 in the first quarter of 2020. Investors and analysts paid close attention to net income metrics to ensure that the Company’s expansion did not come at such a high cost that the Company became unprofitable.
Under pressure to increase its profitability, Celsius turned to accounting fraud. Specifically, throughout 2021, Celsius dramatically understated its expenses related to share-based compensation and also improperly accounted for former employees’ and directors’ share-based compensation in order to report inflated net income and net income per share.
To learn more about this action, you are encouraged to contact Joshua Grabar at [email protected] or call 267-507-6085.
