Starbucks executives and board members are facing a shareholder derivative lawsuit alleging they misled investors about the coffee giant’s “Triple Shot Reinvention” growth strategy, contributing to a sharp decline in the company’s stock price.

Filed Monday by shareholder Portia McCollum, the lawsuit accuses former CEO Laxman Narasimhan, Chief Financial Officer Rachel Ruggeri, and 10 current and former board members of breaching their fiduciary duties by providing overly optimistic growth projections without accounting for significant market risks.

Allegations of Misleading Projections

The lawsuit claims Starbucks failed to disclose the limitations of its revenue and growth forecasts, particularly regarding its reliance on expansion in international markets such as China. McCollum argued that the company understated the risks posed by macroeconomic uncertainty and increased competition, particularly from Chinese rivals.

The derivative suit echoes a related class action filed in August by shareholder Charles Garbaccio, who accused Starbucks of promoting its reinvention strategy in November 2023 while downplaying risks.

Earnings Miss and Stock Price Fallout

Both lawsuits highlight Starbucks' April 2024 announcement, when the company reported disappointing earnings for its fiscal second quarter and lowered its full-year guidance, citing “macro conditions” and “fierce competition among value players” in China. The announcement caused Starbucks’ stock to plummet 15% in a single day, from $88.49 to $74.44.

The lawsuits argue that this decline harmed investors who relied on the company's allegedly misleading statements.

Leadership Shake-Up

The legal challenges follow the abrupt departure of CEO Laxman Narasimhan in 2024 after a 14-month tenure marked by declining stock prices and slowing global sales. Despite these challenges, Starbucks' stock has since rebounded, closing at $100.70 on Wednesday, well above the lows cited in the lawsuits.

Broader Implications

These lawsuits underscore shareholder dissatisfaction with Starbucks' handling of its growth strategy during a challenging economic period. The outcomes could have lasting implications for corporate governance and disclosure practices at the global coffee giant.