Berger Montague PC informs investors that the firm has filed a securities class action in the United States District Court for the District of New Jersey against individuals associated with Party City Holdco Inc. (“Party City”) (NYSE: PRTY; OTC: PRTYQ). The action is captioned Ryan Shulman v. Bradley Weston, et al., Case No. 2:23-cv-04121 and is brought on behalf of investors who purchased Party City securities between November 8, 2022 and June 9, 2023, inclusive (the “Class Period”).

According to the complaint, throughout the Class Period, defendants Bradley Weston and Todd Vogensen made materially false and misleading statements and/or omissions concerning Party City’s liquidity position, capital resources, and borrowing capacity.

The truth began to emerge on January 6, 2023, when The Wall Street Journal published a short article stating for the first time that Party City was contemplating filing bankruptcy. The article stated in relevant part: “Party City Holdco Inc. is preparing to file for bankruptcy within weeks, according to people familiar with the matter, after the party-favor retailer’s cash dwindled and inflation dampened sales.”

Following this news, Party City’s stock price declined 50%, from a closing price of $0.358 on January 5, 2023, to a closing price of $0.179 on January 6, 2023.

Then, on January 17, 2023, Party City filed for bankruptcy pursuant to Chapter 11 of the U.S. Bankruptcy Code. The bankruptcy filings reveal that Party City was well aware of its liquidity problems and credit facility shortfall for several months.

Following this news, Party City’s stock price declined by 67% over a two-day span from a closing price of $0.374 on January 17, 2023, to a closing price of $0.121 on January 19, 2023.

Finally, on June 9, 2023, Party City filed a Form 8-K with the U.S. Securities and Exchange Commission admitting that: (i) the Q3 2022 10-Q should have included a “going concern” warning; (ii) there was a material weakness in internal control over financial reporting as of the date the Q3 2022 10-Q was filed; and (iii) Party City’s independent audit firm Ernst & Young LLP (“E&Y”) resigned as the company’s audit firm due to a disagreement with Party City management about its treatment of the going concern issue. The Form 8-K noted that the Q3 2022 10-Q contained a “material error,” that it “should no longer be relied on,” and that it “should be restated.”

Following this news, Party City’s stock price declined by 22% over the next three trading days from a closing price of $0.046 on June 9, 2023, to $0.036 on June 14, 2023.

The complaint alleges that, throughout the Class Period, the defendants: (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 Party City’s ability to continue as a going concern; (iii) downplayed the nature and extent of Party City’s then-existing liquidity problems; (iv) omitted that Party City’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.

Investors who purchased or acquired Party City securities between November 8, 2022 and June 9, 2023, may no later than October 2, 2023, seek to be appointed as a lead plaintiff representative of the class.