US functional drinks group Celsius Holdings has agreed to settle three connected shareholder actions linked to accounting practices.

According to a court document filed with the District Court of Clark County, Nevada, investors Jennifer Hammond, Nicholas Ingrao, Doreen Lampert and Dana Hepworth, alleged that the energy drinks major had engaged in "improper accounting" practices in 2021.

The plaintiffs claimed Celsius had "reported enormously overstated net income" for the second and third quarter periods in its 2021 fiscal year, having failed to recognise expenses linked to accelerating "the vesting schedule" for "share-based compensation" of employees who had either retired or left the company in the second and third quarters of 2021.

The Florida-headquartered business has "vigorously denied" the allegations and continues to do so, the court document said.

Nonetheless, Celsius entered into a stipulation and agreement of settlement with the plaintiffs on 2 December, having decided that a settlement was "in the best interest" of the company and its shareholders.

On 24 January, the Eighth Judicial District Court in Clark County, Nevada, granted preliminary approval to settle the dispute for $987,500, covering "various corporate governance reforms" and attorney fees.

Court documents said Celsius has "suffered damage including, but not limited to, the settlement of the factually related securities class action, the costs incurred in connection with an investigation by the SEC [the US Securities and Exchange Commission], unjust compensation, and costs incurred with improving the internal controls and restating the company's financial statements".

The Nasdaq-listed company agreed to pay a $3m fine to settle charges from the SEC over improper accounting for stock-based awards in January.

The regulator highlighted issues in Celsius’ 2021 financial statements for the second and third quarters, which were deemed “materially inaccurate” due to mishandled stock-based compensation expenses. 

According to the SEC, Celsius “improperly accounted for stock-based compensation expenses” after altering the terms of stock awards for six employees who were leaving the company, and retiring board members. 

The company neither admitted nor denied any wrongdoing in agreeing to settle, according to the SEC’s “cease-and-desist proceedings” document.

A hearing to decide on whether to approve the latest proposed settlement will be held on 27 March. Celsius stockholders have until 25 February to object to the settlement.

Celsius could not be reached for comment on the settlement at the time of writing.