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Jessica Alba's Honest Company are being sued by shareholders for alleged fraud.

The LA's Finest star's firm has been accused of misleading people by failing to disclose essential details about sales after they saw business boom during the early months of the coronavirus pandemic, when parents were stocking up on diapers and other products, only to fall in the subsequent quarters.

According to documents obtained by TMZ, the shareholders insisted they bought Honest stock when the company went public in May 2021 because of strong financial reports from the previous year, making it seem as if the company was on the rise.

However, two months later, a report from the firm revealed they had lost US$20 million (S$27 mil) in the second quarter of 2021, causing stock prices to plummet almost 43% from the public offering price.

The shareholders alleged in the lawsuit that Honest hid the basic fact that consumers had stockpiled because of the pandemic and by the time they went public, they knew sales had dropped in a major way.

However, the group admitted Honest had disclosed the global health crisis had contributed to high sales and there was no assurance the figures would continue at such a level, but they argued the firm knew sales had already begun to drop but weren't transparent about it.

A spokesperson for Jessica and the Honest Company has not yet commented on the lawsuit. — BANG SHOWBIZ

Photo: TPG News/Click Photos

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