PR Newswire
NEW YORK, Oct. 17, 2023
NEW YORK, Oct. 17, 2023 /PRNewswire/ -- Pomerantz LLP announces that a class action lawsuit has been filed against Shift4 Payments, Inc. ("Shift4" or the "Company") (NYSE: FOUR) and certain officers. The class action, filed in the United States District Court for the Eastern District of Pennsylvania, and docketed under 23-cv-03969, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Shift4 securities between June 5, 2020 and April 18, 2023, both dates inclusive (the "Class Period"), seeking to recover damages caused by Defendants' violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder, against the Company and certain of its top officials.
If you are a shareholder who purchased or otherwise acquired Shift4 securities during the Class Period, you have until October 19, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
[Click here for information about joining the class action]
Shift4 provides software and payment processing solutions in the United States. The Company provides, among other products and services, integrated and mobile point-of-sale ("POS") solutions. Shift4 conducted its initial public offering and began operating as a publicly traded company on or about June 5, 2020.
In Shift4's third quarter ("Q3") of 2022, the Company completed its so-called "mass strategic buyout program" as part of a purported strategic initiative to insource its sales distribution network.
According to Shift4, because the Company is not a "member bank" as defined in certain payment network rules, the Company is not eligible for primary membership in certain payment networks and is therefore unable to directly access them. Accordingly, Shift4's payment networks require the Company to be sponsored by a member bank as a service provider, which the Company has accomplished through a sponsorship agreement with its sponsor bank. To cover overdraft obligations at the sponsor bank, prior to December 2022, Shift4 had funds deposited in a sponsor bank merchant settlement account to facilitate gross card transaction deposits for those customers the Company bills on a monthly, as opposed to a daily, basis.
The Complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Shift4 had inadequate disclosure controls and procedures and internal control over financial reporting; (ii) as a result, Shift4 failed to properly account for customer acquisition costs, thereby artificially inflating its net cash provided by operating activities; (iii) accordingly, Shift4 would likely be forced to restate one or more of its previously issued financial statements; (iv) Shift4 employed accounting maneuvers in connection with, among other things, its mass strategic buyout program and sponsor bank merchant settlement account, that were designed to present an inaccurate picture of, inter alia, the Company's performance, its underlying business quality, and its earnings power; (v) all the foregoing, once revealed, was likely to negatively impact Shift4's reputation and business; and (vi) as a result, the Company's public statements were materially false and misleading at all relevant times.
On October 21, 2022, Shift4 disclosed in a filing with the U.S. Securities and Exchange Commission ("SEC") that the Company's Q3 2021, full year ("FY") 2021, first quarter ("Q1") 2022, and second quarter ("Q2") 2022 financial statements should no longer be relied upon and would need to be restated because of a material weakness in the Company's financial controls, which had caused it to incorrectly treat "customer acquisition costs" as cash used in investing activities rather than cash used in operating activities in its Consolidated Statements of Cash Flows.
On this news, Shift4's stock price fell $1.21 per share, or 2.67%, to close at $44.16 per share on October 24, 2022.
On November 8, 2022, Shift4 filed restated financial statements with the SEC to properly account for its historical customer acquisition costs. As a result of the restatements, Shift4 negatively revised its net cash provided by operating activities to $8 million (down from its originally reported $26.7 million), $4 million (down from its originally reported $23.4 million), and $3 million (down from its originally reported $29.2 million) for the years ended December 31, 2019, 2020, and 2021, respectively; negatively revised its net cash used in operating activities to $7.1 million (up from its originally reported $1.7 million) and net cash provided by operating activities to $30.8 million (down from its originally reported $37.1 million) for the three months ended March 31, 2021 and 2022, respectively; negatively revised its originally reported $5 million of net cash provided by operating activities to $7.7 million of net cash used in operating activities for the six months ended June 30, 2021, as well as negatively revised net cash provided by operating activities to $70.8 million (down from its originally reported $85 million) for the six months ended June 30, 2022; and negatively revised its net cash provided by operating activities to $6.3 million (down from its originally reported $25.6 million) for the nine months ended September 30, 2021.
On April 19, 2023, Blue Orca Capital published a report addressing Shift4 (the "Blue Orca Report"). The Blue Orca Report alleged, among other things, that "Shift4 [is], in reality, a roll-up of low-tech POS systems and payment processors which is substantially less profitable, generates far less cash, and is materially more levered than investors are led to believe." The Blue Orca Report further alleged that in 2022, "Shift4 engaged in a string of highly questionable and hyper-aggressive accounting maneuvers seemingly designed to keep the stock afloat, from cash flow manipulation to inexplicable distributor acquisitions that enabled it to capitalize a major component of COGS [cost of goods sold]." For example, the Blue Orca Report alleged, inter alia, that Shift4's "buyout of 50% of its independent distributors"—i.e., in connection with its mass strategic buyout program—"and Q4 2022 cash account withdrawal" from its sponsor bank merchant settlement account "together inflated operating cash flow by 61%."
On this news, Shift4's stock price fell $5.95 per share, or 8.68%, to close at $62.59 per share on April 19, 2023.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered billions of dollars in damages awards on behalf of class members. See www.pomlaw.com.
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CONTACT:
Robert S. Willoughby
Pomerantz LLP
[email protected]
888-476-6529 ext. 7980
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SOURCE Pomerantz LLP
