Shareholders Slap Target With A Lawsuit
Target is facing a shareholder lawsuit after the company's controversial Pride merchandise resulted in significant backlash, boycotts, and a drop in stock price.
America First Legal, a group headed by Trump Administration senior advisor Stephen Miller, filed a complaint against Target and its board of directors on behalf of a Target shareholder for misleading investors about its ESG and DEI mandates.
The lawsuit follows after customers were shocked when mass June Pride Month displays were unveiled featuring female-style swimsuits that can be used to "tuck" male genitalia, "Super Queer" clothing, party supplies, home decor, books, and a "Grow at Your Own Pace" saucer planter.
AFL said that Target's 2022 and 2023 Proxy Statements assured shareholders and investors that the board was monitoring for potential social and political risks associated with the company's ESG and DEI mandates, but that Target "embraced the radical transgendered agenda with its stories-and-family-themed 'Pride' marketing and sales campaign" — despite the potential for customers and shareholders to feel differently.
Their alleged misguided decisions caused a $12 billion collapse in share value — the largest stock price decline in over 20 years — and Target's market value is now down from over $74 billion in May to $60.3 billion as of Wednesday.
This decline has resulted in some banks lowering their price objective — from $180 to $145 — citing weakened peer multiples, decelerating traffic, and modest mobile app engagement.
Target later dialed back the displays at some stores, which angered some members of the LGBTQ community, but the retailer said it would protect employees against threats from angry customers.
AFL is suing for a "declaration that Target’s 2023 director election was void," a declaration of the company violating Section 14(a) and Section 10(b) of the Exchange Act, an order for damages from each Defendant and "such other and further relief as the Court deems just and proper, including reasonable attorney’s fees and costs." They also demanded a trial by jury.
When reached for comment, Target had not immediately responded.
For now, the lawsuit serves as yet another reminder of the impact of corporations' choice of messaging and merchandise and the potential financial repercussions.