According to the Complaint, Party City sells party goods, costumes, decorations, and related items through retail and wholesale channels, primarily in North America.

On November 8, 2022, the first day of the Class Period, Party City filed a Form 10-Q with the SEC for the third quarter ended September 30, 2022. The Complaint alleges that the Form 10-Q included multiple misleading statements about the Company’s liquidity position, capital resources, and borrowing capacity.

On January 17, 2023, Party City abruptly filed for bankruptcy. The Company explained in its bankruptcy filings that the need to file for bankruptcy arose from the Company’s ongoing liquidity shortfall, its need for additional loans beyond the credit lines available to it, and its inability to locate lenders willing to provide additional loans, issues which had not been disclosed to investors.

On June 9, 2023, the last day of the Class Period, Party City filed a Form 8-K with the SEC revealing that the Company’s independent audit firm Ernst & Young LLP resigned as its auditor due to a disagreement about the Company’s decision not to include a “going concern” warning in the Q3 2022 10-Q. The Complaint alleges that the going concern warning would have alerted investors that there was substantial doubt about the Company’s ability to continue as a going concern for the next twelve months.

The Complaint alleges, in sum, that throughout the Class Period, Defendants made or caused to be made misleading statements and omissions concerning the Company’s true financial strength. Specifically, the Complaint alleges that in the Q3 2022 10-Q, the Company: (i) affirmatively misrepresented that its capital resources “will be adequate to meet our liquidity needs for at least the next 12 months”; (ii) omitted that there was substantial doubt about the Company’s ability to continue as a going concern; (iii) downplayed the nature and extent of the Company’s then-existing liquidity problems; (iv) omitted that the Company’s existing credit facilities were insufficient to satisfy its operational needs and that it was unable to obtain additional loans in the normal course of business; and (v) omitted that there was a material weakness in its internal control over financial reporting.

On April 30, 2024, the Court issued an Order appointing Lead Plaintiff and Counsel. Lead Plaintiff filed an Amended Complaint on June 14. Defendants filed a Motion to Dismiss the Amended Complaint on August 30.