Chipotle Mexican Grill was sued by shareholders on Monday for hiding how many of its restaurants it had skimp on partsForcing the chain to spend more on content and hurting its stock value.
In a proposed class action filed in Santa Ana, Calif., federal court, shareholders say Chipotle failed to disclose growing unhappiness among customers with inconsistent portion sizes of its burritos and rice bowls.
He said that the truth came out as customers Expressed disappointment on TikTok and other social mediaChipotle was led by CEO Scott Boatwright and his predecessor Brian Niccol to re-emphasize what they called “generous portions” at its more than 3,600 restaurants.
According to the complaint, the cost of repairing the damage hurt margins, causing Chipotle’s stock price to decline following the company’s second and third quarter results. The October 30 drop wiped out about $6.5 billion of market value.
The lawsuit seeks unspecified damages for buyers of Chipotle stock and options from February 8 to October 29, 2024.
Chipotle did not immediately respond to requests for comment.
The lawsuit was filed hours after the Newport Beach, California-based company removed the “interim” tag from Boatwright’s job title.
Nicole resigns as chief executive To take the same job at Starbucks in August.
Chipotle’s stock price increased more than eightfold during Niccol’s nearly 6-1/2 years in office.
Niccol and former Chief Financial Officer Jack Hartung are also defendants in Monday’s lawsuit. Hartung became Chipotle’s president and chief strategy officer on October 1.
The case is Stradford v. Chipotle Mexican Grill Inc. et al, U.S. District Court, Central District of California, No. 24-02459.
