Skillz Inc. (“Skillz” or the “Company”) operates as a mobile games platform. The Company helps developers build franchises by enabling social competition in their games and other casual e-sport tournaments for players.
On March 8, 2021, Wolfpack Research (“Wolfpack”) published a report entitled “Skillz: It Takes Little Skill to See This Spectacular Disaster Coming.” The Wolfpack report described Skillz as “another SPAC preying on retail investors by obtaining a ridiculous valuation for the SPAC merger based on self-serving projections.” Among other issues, the Wolfpack report alleges that Skillz’ top three games, which represent 88% of its revenues, had already plateaued by the third quarter of 2020. The Wolfpack research accuses Skillz of having a history of announcing big deals and partnerships that have “historically amounted to very little, or nothing at all.” As an example, Wolfpack research pointed to the Skillz recent announcement of its partnership with the NFL that pumped Skillz shares to its all-time highs only days before the Company filed an S-1 Form, allowing insiders to sell millions of shares of stock at inflated prices.
On this news, Skillz stock price fell sharply from $28.59 per share, or over 14%, to close at $24.45 per share on March 8, 2021.
On May 7, 2021, Lowey Dannenberg filed a class action lawsuit against Skillz and several of its officers in the United States District Court for the Northern District of California, on behalf of investors who acquired the Company’s common stock. The Complaint alleges that Defendants, throughout the Class Period, made false and/or misleading statements and/or failed to disclose that: (i) three games responsible for a majority of Skillz’s revenues had declined substantially; (ii) Skillz’s revenue recognition policy misrepresented the financial condition of the company; (iii) unrealistic market growth, specifically in the Android market; and (iv) as a result, defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages. The Complaint can be accessed at this link.
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