WEBTOON Entertainment Inc. (NASDAQ: WBTN) is an entertainment company focused on mobile webcomics and visual storytelling. The Defendants named in this lawsuit include WEBTOON, its Officers and Directors, and the Underwriters of its June 2024 initial public offering.

Grabar Law Office is investigating claims on behalf of shareholders of WEBTOON Entertainment Inc. (NASDAQ: WBTN). The investigation concerns whether certain officers and directors breached the fiduciary duties they owed to the company.

WHY? On June 27, 2024, WEBTOON Entertainment Inc. (NASDAQ: WBTN) filed its prospectus on Form 424B4 with the SEC, which forms part of the Registration Statement. In the IPO, the Company sold 16,371,549 shares of common stock at a price of $21.00 per share. The Company received net proceeds of approximately $308.5 million from the Offering. The proceeds from the IPO were purportedly to be used for general corporate purposes, including working capital, operating expenses, and capital expenditures.

According to an underlying securities fraud class action, when WEBTOON Entertainment Inc. (NASDAQ: WBTN) went public, its Registration Statement made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, the complaint alleges that WEBTOON misrepresented the health of its business at the time of its IPO by portraying Monthly Active Users (“MAU”) as stable, durable, and rebounding, despite allegedly knowing—based on internal daily, weekly, and monthly tracking—that MAUs in Korea and the Rest of World were actually declining sharply leading up to the IPO. Plaintiff also alleges that WEBTOON failed to disclose that the pre-IPO delay of an AI recommendation tool contributed to weakening user engagement. In addition, the complaint claims WEBTOON issued misleading risk disclosures because it warned only that MAU declines and foreign currency fluctuations could occur, even though both phenomena were allegedly already occurring for months and materially affecting operating results. These alleged misstatements and omissions form the basis of the Section 11 claim, with related Section 15 control-person allegations against the individual defendants.

On November 14, 2025, the United States District Court for the Central District of California denied Defendants’ attempt to dismiss the securities fraud class action complaint.

In allowing the class action to proceed, the court determined that Plaintiff adequately alleged that WEBTOON misled investors about the condition of one of its most critical performance metrics—Monthly Active Users (“MAU”)—at the time of its IPO. The Complaint plausibly alleged that WEBTOON publicly characterized MAU levels as “stable,” “durable,” “consistent,” “rebounding,” and positioned for growth, while internally the company allegedly tracked MAUs daily, weekly, and monthly and knew that MAU levels in Korea and the Rest of World were declining sharply leading up to the IPO. The Court found it plausible that WEBTOON’s statements created a misleading impression of stability and positive momentum when WEBTOON allegedly knew MAUs were deteriorating and that the delay of a promised AI recommendation tool had already contributed to weakening user metrics. These allegations sufficed to plead the falsity, scienter, and duty-to-disclose elements needed for the Section 10(b)/Rule 10b-5 claim concerning MAUs.

The Court also held that Plaintiff plausibly alleged that WEBTOON’s risk disclosures and omission-based statements were misleading under both the securities laws and Regulation S-K Items 105 and 303. According to the Complaint, WEBTOON warned only that MAU declines and foreign currency fluctuations “could” occur, while those risks had already materialized before the IPO and were allegedly known to management. The Complaint further alleged that WEBTOON was aware of a six-month adverse trend in currency exchange rates that was already negatively affecting operating results but failed to disclose it. Because the Complaint sufficiently alleged that Defendants spoke about these metrics and trends while withholding contradictory, known adverse information, the Court allowed the MAU-related 10(b) claim, the misleading risk-disclosure theory, the Regulation S-K Item 105 and Item 303 claims, and the related Section 15 control-person claim to proceed.

WHAT YOU CAN DO NOW: If you purchased WEBTOON (NASDAQ: WBTN) shares on or near the June 27 IPO, you are encouraged to contact Joshua Grabar at jgrabar@grabarlaw.com, or call 267-507-6085.  You can seek corporate reforms, the return of funds back to the company, and a court approved incentive award at no cost to you whatsoever.