Last August, an investment arm of Koch, Inc. (formerly Koch Industries) bought shares reflecting 16.1% of the value of the retail shopping app Ibotta, Inc., becoming the company’s largest public shareholder.
This is an unusual acquisition for Koch, which generally maximizes its control over companies by making loans to private — not public — companies (as it does in the lithium battery industry) or buys companies outright (as it did with subsidiaries Georgia-Pacific and Molex).
Ibotta offers customers cash back on groceries and other products when they upload their receipts for purchases from retailers with which it has relationships, including Walmart, Family Dollar, Dollar General, Albertsons, and Target.
Law firms are now creating classes of investors and filing lawsuits alleging that Ibotta engaged in securities fraud when it went public in April 2024, claiming that the company’s registration statement and prospectus contained false or misleading information, particularly regarding the risk of losing major retailers like Kroger.
Kroger’s deal with Ibotta to use its app was “at-will,” meaning that the second largest grocery retailer after Walmart did not have a firm contract to use Ibotta. When Ibotta failed to disclose this and Kroger did not exercise its option with the app company, investors lost money when Ibotta’s share price dropped by half.
When Ibotta went public, Koch owned $386 million of its stock, and while its share price has somewhat recovered, it is still 30% below its original offering price.
Dozens of class action law firms are sending out shareholder alerts encouraging investors to join their lawsuit as lead plaintiffs against Ibotta before a court-imposed deadline of June 16.
The Koch network has a history of attacking class action lawsuits. The American Legislative Exchange Council (ALEC) originally approved a “model” bill in 2000 (and amended it in 2018) to reduce the number and scope of class action lawsuits by restricting law firms to only representing plaintiffs from their own home state as well as requiring appellate court review of trial court decisions to approve the creation of classes of plaintiffs.
Also, in an effort to settle complaints out of court, the ALEC bill adds an “administrative process” factor to the class certification prerequisites, asserting that class actions are unnecessary where the allegations are within the purview of federal or state regulatory agencies. This would include most regulatory violations and takes away the fundamental purpose of class actions to begin with: namely, to stop legal violations when the government will not act.
As the Center for Media and Democracy (CMD) reported in January, Koch is also the target of another class action lawsuit in which more than 2,300 commercial fishermen in Texas are suing in connection with an oil spill by Koch’s refinery subsidiary, Flint Hills Resources.
The fishermen allege that since Flint Hills underreported the size of the spill, “the urgently needed response [was] significantly less than necessary to prevent the unfettered spread of the oil.” They are seeking compensation for the loss of income from the closure of fishing areas affected by the spill.
Class action lawsuits generally help keep the courts from being clogged with hundreds of separate lawsuits.
Through its Violation TrackerGood Jobs First has detailed federal and state regulatory actions and private class action lawsuits that have cost Koch over $1 billion in penalties since 2000.
