The self-styled ‘next-generation’ real estate broker Redfin could be sued by its former CEO and cofounder in relation to one of its pending patent applications, according to an update in the company’s regulatory filing with the U.S. Securities and Exchange Commission. The revelation was first reported by GeekWire.
The disclosure comes with Redfin just days away from launching its Initial Public Offering, which is said to be one of the most eagerly anticipated in the technology industry this year. Redfin earlier said it hopes to raise around $107.8 million through its IPO, where it will sell off 9.23 million shares in the company with a price set at the $12-$14 range.
However, the threat of legal action by its ex-CEO David Eraker could yet complicate matters.
“On July 24, 2017, we received a letter from counsel to David Eraker, one of Redfin’s founders and our former CEO,” Redfin said in its updated S-1 filing. “The letter focuses on allegations about the inventorship of one of Redfin’s patent applications that has not issued and does not cover our current products or services. The letter threatens litigation, but no complaint has been filed. We believe these claims have no merit. We will defend ourselves vigorously if Mr. Eraker sues us. However, litigation is uncertain and expensive, and any judgment or settlement could harm our business.”
Redfin’s main worry of cause is that the threat of legal action could have a negative impact on its targeted price range, meaning it would raise less than the $107 million it’s hoping for. Redfin was legally obliged to make the disclosure ahead of its IPO, media reports say.
Redfin was founded by Eraker back in 2002. Eraker served as the company’s CEO for four years until leaving in 2006. He is currently the cofounder and CEO of a real estate brokerage called Surefield that aims to replace traditional home viewings with 3-D virtual tours instead, in order to cut back on agent’s fees.
Redfin’s IPO is set to hit the markets on Friday.