Webtoon Class Action: IPO Claims Survive November 2025 Ruling

The Webtoon class action lawsuit is a securities fraud case brought by investors who bought shares in or traceable to Webtoon Entertainment’s June 2024 initial public offering, alleging the IPO registration statement misled the market about the company’s monthly active users and financial trajectory. Filed in the U.S. District Court for the Central District of California as Brookman v. Webtoon Entertainment Inc. (Case No. 2:24-cv-07553-CBM-RAO), the suit survived a motion to dismiss on its core claims in November 2025 and remains in active litigation with no settlement.¹²

What Investors Say Webtoon Hid

Webtoon priced its IPO at $21 per share on June 27, 2024, raising about $315 million, and told the market it had roughly 170 million monthly active users across more than 150 countries.³⁴ Then, on August 8, 2024, in its first earnings release as a public company, Webtoon reported results for a quarter that had ended one business day after the IPO closed, and the numbers showed weak revenue growth along with substantial declines in monthly active users. The stock fell 38 percent the next day to $12.75.⁵

The complaint, filed September 5, 2024, argues the drop was not a surprise inside the company. The specific allegations:

Webtoon called its MAU levels “stable,” “durable,” “consistent,” “rebounding,” and “positioned for growth,” while internal tracking allegedly showed MAUs in Korea and the Rest of World declining sharply in the months before the IPO.⁶
The company allegedly failed to disclose that a promised AI-powered recommendation feature had been delayed and that the delay was already weakening engagement.⁷
The registration statement described MAU declines and adverse foreign currency movements as risks that “could” happen. Plaintiffs say those risks had already materialized, and that management knew about a six-month adverse currency trend hurting operating results.⁶
The complaint also alleges the company hid a slowdown in advertising and intellectual property adaptation revenue, and understated the drag from foreign currency exposure.⁸

Who Is Being Sued

The suit names Webtoon itself along with officers and directors who signed or authorized the registration statement: founder, CEO, and board chairman Junkoo Kim; CFO and COO David J. Lee; and directors Haejin Lee, Namsun Kim, Jun Masuda, Isabelle Winkles, and Nancy Dubuc.¹

Nine investment banks that underwrote the IPO are also defendants: Goldman Sachs, Morgan Stanley, J.P. Morgan, Evercore, Deutsche Bank Securities, UBS, HSBC, Raymond James, and LionTree. The complaint says they violated Section 11 of the Securities Act of 1933 by failing to conduct a reasonable investigation into the accuracy of the registration statement.¹

The case was brought on behalf of investors who purchased Webtoon common stock pursuant to or traceable to the June 2024 IPO. No class has been certified.⁸

What the Judge Ruled in November 2025

On November 14, 2025, Judge Consuelo B. Marshall issued a mixed ruling on the defendants’ motion to dismiss, keeping the most significant claims alive.²

Claims That Survived

Section 10(b) and Rule 10b-5 fraud claims tied to monthly active user statements moved forward. The court found Webtoon’s positive language about its user base was not mere puffery and plausibly created a false impression of stability while the company knew users were declining. The court also held that Webtoon had a duty to disclose known intra-quarter MAU declines that contradicted its public statements.²

The judge likewise let the risk-disclosure claims proceed, finding that Webtoon framed MAU declines and currency fluctuations as hypothetical when, per the complaint, they had already occurred. Claims under Regulation S-K Item 105 (inadequate risk factors) and Item 303 (failure to disclose known trends affecting revenue) survived on the same reasoning about pre-IPO currency effects on revenue. Section 15 control-person claims against the individual defendants also survived, because they signed the registration statement and an underlying violation had been adequately pleaded.²

The court rejected Webtoon’s “bespeaks caution” defense, finding the registration statement did not contain sufficiently precise cautionary language addressing the company’s projections about user growth.²

Claims Dismissed

Section 10(b) and Rule 10b-5 claims based on Webtoon’s statements about “revenue prospects” were dismissed. The court treated those statements as vague expressions of optimism that qualify as non-actionable corporate puffery, the kind of general cheerfulness courts hold no reasonable investor would rely on.²

What Webtoon’s Numbers Have Shown Since

The company’s own disclosures have tracked the direction described in the complaint. Webtoon posted a net loss of $76.6 million in the second quarter of 2024, the quarter that included the IPO.⁹ Losses widened in 2025 to roughly $346 million, a 141 percent increase over 2024.¹⁰ The 2025 annual report acknowledged a “history of net losses” and warned that expenses could keep outpacing revenue growth due to content costs, legal proceedings, and the ongoing costs of being a public company. Monthly active users stood at about 157 million as of December 31, 2025, down from the roughly 170 million figure in the IPO prospectus.¹¹

The share price has never recovered its IPO level. As of mid-June 2026 the stock trades around $11.56, roughly 45 percent below the $21 offering price, giving the company a market capitalization of about $1.5 billion.¹²

Where Things Stand and Other Investigations

The Brookman case remains in active litigation. Having cleared the motion to dismiss on its key claims, it is expected to proceed to discovery. No settlement has been proposed or reached, and no class has been certified.⁷

Two additional law firms have opened separate shareholder investigations that are not part of the Brookman class action. Kaskela Law announced its inquiry in March 2026, focused on whether senior officers and directors violated securities laws or breached fiduciary duties.⁵ Halper Sadeh LLC followed in April 2026 with a similar fiduciary-duty investigation.¹³ Neither had produced a filed lawsuit as of June 2026; both firms are encouraging long-term shareholders to contact them about potential claims, including corporate governance reforms and the return of funds to the company.

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GlobeNewsWire. Kaskela Law Announces Shareholder Investigation of Webtoon Entertainment
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