Social media technology company Snap Inc. (SNAP) revealed it was being investigated by the U.S. Department of Justice and the Securities and Exchange Commission that it misled investors ahead of its initial public offering in March 2017.
The allegations follow a class-action securities lawsuit filed in federal court in Los Angeles earlier this year, in which investors alleged that Snap withheld information regarding how much competition it was facing from photo-sharing app Instagram, owned by Facebook Inc. (FB) , and how much that was impacting its growth and bottom line.
That suit also alleged that Snap didn't disclose a lawsuit it was facing from a former worker who claimed the company's calculation and reporting of daily active users was inaccurate.
"Snap has been responding to subpoenas and requests for information made by staff from the DOJ and the SEC," the company said Tuesday in a statement. "It is our understanding that these regulators are investigating issues related to the previously disclosed allegations asserted in the class action about our IPO disclosures. While we do not have complete visibility into these investigations, our understanding is that the DOJ is likely focused on IPO disclosures relating to competition from Instagram.
"We continue to believe the class action's claims are meritless and our IPO disclosures were accurate and complete," Snap said in the statement. Reuters first reported the news late Tuesday.
Shares of Snap were down 7% to $6.24 in premarket trading on Wednesday, after ending the day Tuesday at $6.71.