527 F.Supp.3d 537
S.D.N.Y.2021Background
- Plaintiffs (investors) sued Opera and officers/underwriters after Opera’s August 2018 IPO alleging (1) false or misleading statements about mobile browser market share/growth and (2) omissions about Opera’s shift into fintech (via minority interest and services with Opay and later acquisition of OKash).
- IPO and public filings touted mobile MAUs and described Opera as a market leader in South Asia, Southeast Asia and Africa, and expressly cited StatCounter as the source for market-share data.
- Opera disclosed a 19.9% minority interest in Opay, loans to and a services agreement with Opay in the IPO Prospectus; Opera acquired OKash in December 2018 and disclosed fintech risks in a later secondary offering prospectus.
- Hindenburg Research published a January 16, 2020 report alleging declining browser market share and predatory microlending practices; Opera’s ADS price fell after the report.
- Defendants moved to dismiss under Rule 12(b)(6). The court granted the motion, holding plaintiffs failed to plead material misstatements/omissions, scienter, loss causation, and in part standing and timeliness for Section 11 claims; leave to amend was granted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Market-share / "market leader" statements in IPO/2018 AR/SPO | Statements omitted that overall market share was declining (StatCounter) and thus were materially misleading under Item 303 | Statements accurately described mobile MAUs, cited StatCounter (public source), and were corporate puffery; loss of market share did not show likely revenue decline | Dismissed: plaintiffs failed to plead material omission under Item 303 or actionable misstatement; statements were puffery or directed readers to StatCounter so not misleading |
| Analyst calls (Nueman’s ~50% Nigeria market-share statements) | Statements were factually inaccurate (allegedly conflated mobile vs. total user base) | Statements referred to mobile market and relied on public StatCounter data | Dismissed: factual dispute not resolved on 12(b)(6) but claims fail for lack of pleaded scienter |
| Omissions re fintech entry (Opay/OKash) under Items 101 & 105 | Opera was already entering fintech pre-IPO and concealed material developments/risks (e.g., app-policy risk, predatory lending) | Opera disclosed minority interest, loans, services agreement with Opay; Opay was not an Opera subsidiary at IPO; fintech entry and Google Play policy changes occurred after IPO and were later disclosed | Dismissed: no duty to disclose Opay business as a subsidiary or imminent entry into fintech; risks disclosed later in SPO; no actionable omission |
| Scienter, loss causation, Section 11 timeliness/standing, control-person liability | Scienter inferred from related-party transactions, prior litigation involving CEO, and rapid fintech revenue growth; Hindenburg report corrected the market causing losses; Section 11 timely for some plaintiffs | No nonpublic contradictory information; no motive/unique personal benefit pled; Hindenburg merely analyzed public data; Section 11 claims time-barred and one plaintiff cannot trace shares; control claims depend on primary violations | Dismissed: plaintiffs failed to plead a strong inference of scienter; Hindenburg not a corrective disclosure (info was public) so loss causation fails; Section 11 claims untimely and one plaintiff lacked standing; control-person claims fail as primary claims dismissed |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (conclusory allegations insufficient)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (holistic scienter standard; strong inference test)
- Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005) (loss causation requirement)
- Basic Inc. v. Levinson, 485 U.S. 224 (1988) (materiality / "total mix" standard)
- TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976) (materiality test)
- ATSI Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) (fraud pleading specifics under PSLRA/Rule 9(b))
- Panther Partners Inc. v. Ikanos Communications, Inc., 681 F.3d 114 (2d Cir. 2012) (Item 303 duty to disclose known trends likely to affect revenues)
- ECA & Local 134 IBEW Joint Pension Trust v. J.P. Morgan Chase Co., 553 F.3d 187 (2d Cir. 2009) (statements of corporate optimism as puffery)
- In re Omnicom Group, Inc. Securities Litigation, 597 F.3d 501 (2d Cir. 2010) (what qualifies as corrective disclosure for loss causation)
- Cent. States, Se. & Sw. Areas Pension Fund v. Fed. Home Loan Mortg. Corp., [citation="543 F. App'x 72"] (2d Cir. 2013) (third-party reports based on public information not corrective)
- Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (no duty to anticipate and disclose future events)