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Shareholders Sue Chipotle Claiming Artificially-Inflated Stock Prices

Shareholders Sue Chipotle Claiming Artificially-Inflated Stock Prices

Monday, July 24th, 2017

Chipotle has drawn ire from both consumers and company shareholders this month, as a slew of breaking headlines caused the company’s stock to plummet. And now a group of investors is filing suit, according to Denver Fox affiliate KDVR, claiming that the company deceived them.

In the shareholders’ lawsuit, filed with the U.S. District Court of Colorado, the claimants say that Chipotle led customers to believe that the company had fixed problems with food safety. After several Chipotle patrons at roughly a dozen Chipotle locations contracted norovirus and e.coli in 2015, shareholders claim that Chipotle hid information about persistent issues with food safety, resulting in artificially-inflated stock prices.

Chipotle store

Had these shareholders been appropriately apprised of information, they claim, they would not have invested in the company and are thus seeking to be compensated for damages resulting from Chipotle's recent downturn.

A Chipotle location in Virginia was forced to close its doors last week after customers became ill, and the Virginia Health Department confirmed an outbreak of norovirus. And shortly after, customers in Dallas documented an incident wherein rats or mice allegedly fell from the ceiling of a Chipotle, and footage of the incident was widely-shared online.

Despite bad press, though, some analysts are looking at Chipotle’s depressed stock prices as an opportunity to invest in a company with a fundamentally sound business model. Kyle Woodley Yahoo! Finance recommended buying the stock in an article published last Friday, citing recent managerial streamlining, a willingness to expand, and a fresh-focused business model that jibes with food trends.

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