RealReal’s $11 Million Deal in Investor IPO Suit Gets Final Nod

An $11 million agreement between RealReal Inc. and investors who said they were misled about the strength of the luxury consignment retailer’s authentication process before its initial public offering will end their dispute after a federal judge in California gave final approval.

The class will split about $7.84 million, and class members will receive about $0.58 per share, according to the settlement approved Thursday by the US District Court for the Northern District of California. The class consists of people or entities that bought stock issued in connection with the company’s IPO between June 27, 2019, and Nov. 20, 2019, the agreement says.

The remaining amount will go toward attorneys’ fees and costs, and about $17,000 will go to the three named plaintiffs, the filing says.

The settlement is fair, reasonable, and adequate, and it’s the result of good faith, arm’s-length negotiations, wrote Judge Edward J. Davila. The proposed plan of allocating the settlement fund among class members and class council is also fair and reasonable, according to Davila.

The settlement and final order isn’t an admission of wrongdoing by any party, Davila wrote, and the final judgment says nothing about the validity of any claims.

RealReal’s registration statement “downplayed the risk that its authentication process was inadequate,” according to the lawsuit, which also named Credit Suisse, Bank of America, and other banks as defendants. The company failed to disclose that its employees didn’t receive extensive training on how to identify fake items, the lawsuit said, and that its quota system for employees “exacerbated product authentication issues.”

RealReal’s share price fell more than 19% after CNBC published a report in November 2019 that showed the company’s authentication process “was not as robust as it led consumers to believe,” according to the complaint.

Rosen Law Firm PA represented the investors. Sidley Austin LLP, King & Spalding LLP, and Wagstaff Law Firm represented RealReal. Paul Hastings LLP represented the banks.

The case is Sanders v. RealReal Inc., N.D. Cal., No. 5:19-cv-07737, 7/28/22.