Expensify Faces Securities Class Action Over 2021 IPO Disclosures

A federal securities class action lawsuit against Expensify, Inc. (NASDAQ: EXFY) is advancing after a U.S. District Court ruling on March 25, 2025. The court's decision to allow the case to proceed does not imply wrongdoing but highlights the importance of due diligence and transparency in IPO disclosures—key concerns for accounting and advisory professionals supporting publicly traded companies.

The litigation is rooted in claims that Expensify’s registration statement and prospectus ahead of its November 2021 IPO omitted material risks and presented an overly optimistic outlook. These allegations remain unproven, and Expensify has denied any misconduct. 

Background: Expensify’s IPO and legal claims 

Expensify is a cloud-based expense management software company headquartered in Portland, Oregon. The platform enables businesses to automate receipt tracking, reimbursements, and expense reporting. 

The company went public on November 11, 2021, offering 9.73 million shares at $27.00 per share. Following the IPO, several investor lawsuits were filed, primarily under the Securities Act of 1933. Law firms including Bronstein, Gewirtz & Grossman, and Block Leviton allege that Expensify did not fully disclose business risks, including macroeconomic pressures and pricing changes. 

Allegations: Legal concerns over disclosure 

According to court documents and public filings, the lawsuits assert that Expensify: 

• Overstated its growth prospects in the IPO documents. 

• Failed to disclose key pricing strategy shifts, including a 2020 price increase. 

• Did not fully explain potential vulnerabilities in its business model. 

These claims are currently under litigation and have not been adjudicated. The court’s recent ruling simply allows the case to move forward to discovery and potential trial. 

Financial performance since the IPO 

Expensify has experienced volatility in both financial performance and share price since its IPO. In 2023, the company faced sharp market reactions after earnings announcements. Its stock declined by 28% in August and 35% in November, reflecting investor response to lower-than-expected results. 

For fiscal year 2023, Expensify reported $150.7 million in revenue and a GAAP net loss of $41.7 million. Operating cash flow was $1.6 million, and adjusted EBITDA reached $13.2 million. 

By fiscal year 2024, the company reported $139.2 million in revenue—an 8% decrease year-over-year—but saw improved profitability metrics. Net loss narrowed to $10.1 million, and adjusted EBITDA grew to $39.4 million, a 199% increase. Free cash flow rose to $23.9 million, indicating greater financial stability. 

These figures suggest a focus on cost control and operational efficiency, despite a slight contraction in top-line revenue. 

Judicial ruling: Case moves forward 

On March 25, 2025, Judge Amy M. Baggio of the U.S. District Court for the District of Oregon ruled that plaintiffs had met the legal threshold to proceed with their claims. The ruling was based on the plausibility that certain omissions—particularly those related to pricing changes—could be considered material by investors. 

The decision followed a December 2024 recommendation by Magistrate Judge Jolie A. Russo to deny most parts of Expensify’s motion to dismiss. Importantly, this ruling does not determine the case’s outcome. Expensify maintains its denial of the allegations, and no findings of liability have been made. 

Insider activity and shareholder optics 

On March 17, 2025, just days before the court ruling, Expensify CEO David Michael Barrett sold 27,331 shares for approximately $91,832. Barrett also executed stock sales in 2024, including 13,268 shares in September and 15,454 shares in November, totaling tens of thousands of dollars. 

These transactions were conducted under Rule 10b5-1 trading plans and included sales tied to tax obligations. Insider sales are common among executives and not necessarily indicative of corporate performance. However, the timing of such trades during legal proceedings may draw attention from market watchers. 

As of March 2025, Barrett owns roughly 4.76 million shares of Expensify’s Class A stock, valued at approximately $14.8 million based on a $3.11 share price. He is not a majority shareholder, and no single individual currently holds a controlling stake in the company. 

Business strategy and future direction 

Despite the litigation, Expensify has continued to expand its product offerings. It recently launched Expensify Travel and has pursued share repurchase programs and debt reduction initiatives. These efforts appear to align with broader goals of improving liquidity and enhancing product-market fit. 

While Expensify’s share price remains well below its $27 IPO level, it has rebounded from a 52-week low of $1.24 to around $3.11 as of March 2025. Analyst forecasts suggest moderate upside, with a 12-month average target of $4.17. 

Key considerations for professionals 

For accounting professionals, financial advisors, and CFOs involved in IPO planning or financial reporting, this case serves as a reminder of the regulatory scrutiny surrounding public offerings. Key takeaways include: 

• Ensuring comprehensive and transparent risk disclosures. 

• Aligning growth projections with economic realities. 

• Monitoring insider transactions for shareholder communication impacts. 

The Expensify case is still in the early stages, and its resolution may set precedents for disclosure obligations and investor protections in the tech sector.