PARIS A U.S. law firm has filed a class action lawsuit against Cnova, the e-commerce arm of French retailer Casino, alleging violations of securities laws in connection with its November 2014 initial public offering (IPO).

The complaint filed by Glancy Prongay & Murray LLP on behalf of investors in a New York district court alleges Cnova failed to disclose its true situation in Brazil at the time of its IPO and that the Brazilian operations lacked sufficient controls.

It alleges Cnova in its IPO registration statement and between Nov. 19, 2014 and Dec. 18, 2015 – the period covered by the class action – overstated net sales and operating profit, and financial statements about its business and prospects “were materially false and misleading at all relevant times”.

In an e-mail to Reuters, Cnova rejected the allegations.

“Cnova believes the allegations are without merit and the company intends to vigorously defends itself. The company has no further comment at this time,” it said.

The suit is a new blow for Casino after Standard & Poor’s last week threatened to downgrade its debt to junk status, citing a high debt burden and weakness in Brazil.

Casino declined to comment.

Casino’s shares have been under pressure since mid-December, when its strategy and finances were criticized by research and investment firm Muddy Waters.

On Dec. 18, Cnova said it had hired legal advisers and external forensic accountants to assess possible employee misconduct related to inventory management at its Brazilian distribution centers, prompting a slide in its shares.

On Jan. 12, Cnova issued an update on the probe and disclosed its net sales may have been overestimated by about 110 million reais.

The investigators hired by Cnova also recommended the firm make preliminary provisions to reflect an impact of 110-130 million reais on earnings before interest and taxes, without immediate cash effects.

On Jan. 21, Cnova stock closed at $2.31, nearly 70 percent below its $7 IPO price.

(Reporting by Dominique Vidalon, additional reporting Pascale Denis; Editing by Geert De Clercq and Mark Potter)