Funko mascots Freddy Funko roll past on a conveyor belt in the Pop! Factory of the company’s new flagship store on Aug. 18, 2017. (Dan Bates / The Herald)

Funko mascots Freddy Funko roll past on a conveyor belt in the Pop! Factory of the company’s new flagship store on Aug. 18, 2017. (Dan Bates / The Herald)

Lawsuit: Funko misled investors about Arizona move

A shareholder claims Funko’s decision to relocate its distribution center from Everett to Arizona was “disastrous.”

EVERETT — A class action lawsuit filed by a Funko shareholder claims the vinyl toymaker didn’t have its bobblehead ducks in a row when it moved its distribution center from Everett to Arizona in 2022.

The lawsuit, filed Friday in U.S. District Court, alleges the company failed to tell investors that it was experiencing significant delays in the rollout of a new software program, critical “to the efficient operation of its new distribution center,” according to court documents.

The delay “would lead to dramatically higher costs and poorer inventory management practices,” resulting in “a substantial, undisclosed impact on Funko’s earnings” and “dramatically lower profit margins,” the lawsuit contends.

Last spring, the Everett-based toymaker issued layoff notices to more than 250 employees at warehouses in Everett and Puyallup and consolidated its distribution operations to a Phoenix suburb.

Funko touted the area’s strategic location and strong talent pool as reasons behind the decision.

The lawsuit, however, characterized the Arizona move and the delay in the software’s launch as ill-prepared and “disastrous,” according to court documents.

The company, whose headquarters remain in downtown Everett, is known for its wide-eyed, pop culture-inspired figures. It also designs and distributes board games, action toys and accessories.

As a result of the firm’s “wrongful acts and omissions, and the decline in the market value of the company’s common stock when the truth was disclosed, plaintiff and other class members have suffered significant losses and damages,” the lawsuit alleges.

Funko did not immediately respond to a request for comment Monday.

The lawsuit cited an August 2022 earnings call in which Funko said it would delay the software rollout — “a platform that we felt wasn’t fully ready to support our business” — until 2023.

In the aftermath, the price of Funko stock fell more than 18%.

A few months later, in November 2022, Funko reported earnings that badly missed analyst estimates. The company significantly lowered its fiscal year 2022 guidance. Its stock price plummeted more than 59%, documents said.

The company “repeatedly spoke of the necessity for these upgrades to serve current and future business needs,” the lawsuit said. “However, these statements were materially false and misleading, or failed to disclose material information necessary to make these statements not misleading,” in violation of the Securities and Exchange Act.

Founded in 1998, Funko’s first products included bobbleheads and coin banks based on retro characters.

The toymaker debuted its signature Pop! line of vinyl figures in 2010.

This is not the first time Funko has incurred the legal wrath of investors.

Shareholders filed a class action suit against the company for allegedly filing misleading statements with the Securities and Exchange Commission in connection with its initial public offering in November 2017. The lawsuit is still pending.

In 2020, a class-action lawsuit claimed that Funko had so much obsolete, excess inventory the company had to lease storage space. The overage was “allegedly caused by Funko’s inability to accurately forecast sales,” the most recent lawsuit notes. That suit was last year settled for $7 million.

Janice Podsada: 425-339-3097;; Twitter: @JanicePods.

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