MEMORANDUM OPINION
Plaintiffs 1 seek recovery in this class action for their purchase of stock or stock options in XM Satellite Radio Holdings, Inc. (“XM” or “the company”) between July 28, 2005 and February 16, 2006 (the “class period”). XM is a Delaware corporation with its principal place of business and chief operating offices located in Washington, D.C. According to plaintiffs’ allegations, on February 16, 2006, XM disclosed that it had incurred significantly increased marketing expenses in its fourth quarter and subsequently XM’s stock dropped by nearly 28.5 percent. Since XM had never reported profits, its value and the value of its stock were based on the number of subscribers it reported, as well as on metrics relating to the company’s marketing expenditures per each new subscriber. The plaintiffs allege that XM’s stated business model was to pursue “cost-effective” growth by consistently reducing marketing expenditures per new subscriber. During the class period, XM had stated it would be able to meet its goal of signing up six million subscribers by year-end 2005. As it tried to meet this target, plaintiffs allege, XM spent extraordinary amounts on marketing without disclosing these expenditures to the market. Plaintiffs contend that XM knew it would be incapable of meeting its target metrics because it had “abandoned” its business model of cost-effective growth, and that several key XM insiders liquidated their own shares of XM stock while in possession of this material, adverse non-public information. Plaintiffs therefore claim that the announcement on February 16, 2006, of the increase in XM’s subscriber acquisition costs was foreseeable, and that the company materially misrepresented its financial outlook during the class period.
The consolidated complaint seeks recovery against XM and its Chief Executive Officer, Hugh Panero, for plaintiffs’ losses under § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5. (ComplA 107.) It also asserts a “controlling person” claim against Panero under § 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). (Compl-¶ 120.) Defendants have moved to dismiss the consolidated complaint pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u-4, for failure to state a claim of *168 securities fraud. As explained herein, because plaintiffs have failed to allege any actionable material misstatement or omission by XM or Panero, the Court grants defendants’ motion to dismiss.
BACKGROUND
XM launched its satellite radio service in September 2001, and currently provides satellite radio service in the United States on over 150 digital channels to over six million subscribers. (Compl.1HI2, 28, 75.) XM’s subscribers include consumers who have purchased XM’s satellite radios at retail electronics stores, as well as owners and lessors of automobiles manufactured with XM satellite radios which have been installed in the car. (Id. ¶ 2.) XM’s stock is traded on the NASDAQ under ticker symbol “XMSR.” (Id. ¶ 1.) During the class period, defendant Hugh Panero was CEO, President, and a director of XM. (Id. ¶ 16.) Satellite radio is a relatively new medium, and XM has only one primary competitor in the field-Sirius Satellite Radio Inc (“Sirius”) — which launched its service in mid-2002. (Id. ¶¶ 4, 31.) Both XM and Sirius offer a variety of music and other audio programming. In October 2004, Sirius made news when it announced that it had signed a deal to broadcast, beginning around January 1, 2006, the daily radio show of media personality Howard Stern, the number one national radio host among eighteen- to forty-nine-year old men. (Id. ¶ 33.) XM offers programming by well-known personalities such as Ellen DeGeneres. (See Valentine Deck Ex. R. [Brian Steinberg, Advertising: XM Aims to Neutralize Sirius, Stern, Wall St. J. (Nov. 14, 2005) ] at B8.) XM, because it entered the market first, enjoyed an early lead over Sirius in market share, but plaintiffs allege that Sirius was steadily gaining ground on XM in the time leading up to the class period. (Comply 35.)
As a new company selling a new technology, XM has not yet turned a profit. (Id. ¶ 36.) Plaintiffs complaint alleges that in lieu of profits, the market focuses on several “subscriber-related metrics” to gauge the health of the company. (Id.; PI. Opp. at 4.) Most relevant for purposes of this action are subscriber acquisition costs (“SAC”) and costs per gross addition (“CPGA”). SAC includes subsidies that XM offers on new radios as an enticement to potential subscribers, distribution expenses, and negative margins from direct sales of merchandise, divided by the number of new subscribers for the relevant period. (Compl. ¶ 41; Valentine Decl. Ex. G [Nov. 9, 2006 Form 10-Q] at 46.) In other words, XM often sells its radio units at a loss in order to gain subscribers, and SAC is an expression of that total loss divided by new subscribers acquired for a given period. CPGA includes the amounts included in SAC, as well as advertising and marketing expenses and ongoing “loyalty payments” to distribution partners, again divided by the number of new subscribers for the relevant period. (Compl. ¶ 41; Valentine Deck Ex. G at 47.)
Plaintiffs contend that XM consistently “emphasized to the market” that it was achieving rapid subscriber growth in a “cost effective manner” and promoting a trend of “steadily declining” subscriber costs. (Compl.1ffl 42, 46, 47). Indeed, immediately prior to the class period, XM reported quarter-after-quarter declines in SAC and CPGA. (Id. IT 46.) However, plaintiffs allege, because of increased competition from Sirius during the class period, XM abruptly decided to abandon its “cost effective growth” strategy for a “growth at any cost” approach, while letting the market believe that SAC and CPGA would continue to decline. (Id. ¶ 47.) In particular, XM launched a widespread marketing campaign called “Listen Large” in the third quarter of 2005, de *169 signed to counter heavy promotion by Sirius of its deal with Howard Stern. (Id. ¶ 48.) This campaign reportedly cost XM $25 million, but plaintiffs complaint alleges that XM actually spent between $100,000,000 and $150,000,000 on this advertising. (Id. ¶ 49.) In addition, the complaint alleges, XM drastically reduced the prices of its radios and offered other special promotions and rebates during the class period, in part to combat product supply shortages. (Id. ¶¶ 55-58.) The complaint also alleges that “a former SVP of Human Resources employed at XM during the Class Period commented that the major marketing and subscriber growth initiatives undertaken during the fourth quarter of 2005 (including Listen Large) had been fully budgeted well in advance because it was known as early as October 2004 that Howard Stern would begin broadcasting on Sirius in January 2006,” and that the witness “said these costs could simply not be viewed as any kind of surprise or unanticipated event.” (Id. ¶ 51.) These business decisions, which apparently generated fewer new subscribers than XM had forecast, caused SAC and CPGA numbers to increase substantially in the fourth quarter of 2005: SAC increased approximately 39% and CPGA increased approximately 36% compared to the fourth quarter of 2004. (Id. ¶¶ 75, 77.) Plaintiffs claim that XM’s failure to disclose its “concealed change in business philosophy” to the market, which artificially inflated XM’s stock price during the class period, is actionable under § 10(b) and Rule 10b-5. (See PI. Opp. at 8; Compl. ¶ 107.)
Plaintiffs quote extensively from a number of statements made on five separate dates during the class period that they contend were materially false or misleading. (See PI. Opp. at 6 n. 6). These statements are discussed below.
I. July 28 and August 2, 2005 Statements
On July 28, 2005, XM issued a press release announcing its financial results for the second quarter of 2005. (Comply 59.) The company’s revenues had more than doubled over the second quarter of 2004, and it reported “Efficient Quarterly Subscriber Growth,” with CPGA at $98, compared to $101 for the second quarter of 2004. (Id.) The press release also announced that XM had increased its 2005 subscriber guidance from five-and-a-half million to six million ending subscribers for 2005, based on their “first half performance and an even stronger outlook for the second half of the year.” (Id.) That same day, XM hosted a conference call with investors and financial analysts to discuss its second quarter 2005 earnings and financial outlook. During the call, defendant Panero reiterated the increased subscriber guidance of six million year-end subscribers and also announced that SAC and CPGA had improved over the second quarter of 2004: SAC had dropped 12% from $57 compared to $50, and CPGA had dropped 3% from $101 to $98. (Id. ¶ 60.) He stated that the company was “achieving rapid growth with sound financial performance.” (Id.) XM’s Chief Financial Officer, Joe Euteneuer, added that XM’s “efficient marketing efforts have enabled [them] to continue demonstrating cost-effective subscriber growth,” reflected in SAC and CPGA improvements, and stated: “We expect CPGA to remain stable during the second half of the year.” (Id. ¶ 61.) Later in the call, during a question and answer session, someone asked the XM representatives whether they expected SAC to remain stable in the second half of the year as well. (Id. ¶ 62.) In response, an unidentified XM representative reiterated that they thought CPGA would be stable, but stated that “SAC [can] bounce around a bit de *170 pending upon what your actual hardware subsidy elements are on any given time-frame.” (Id.) The XM representative then re-emphasized the improvements in SAC and CPGA results over the previous year’s numbers. (Id.) Additionally, when asked whether XM viewed Howard Stern’s new programming at Sirius as a risk to its growth estimates, an unidentified XM representative remarked that “the announcement of Howard Stern[’s deal with Sirius] has been in the marketplace for almost 1.5 years now, so we have seen no effect of that at all during that period.... That has been around for awhile, so we continue to have strong demand.” (Id.) The representative noted, “clearly we would not be upping our [year-end subscriber] guidance if we thought that there was an issue with regards to how he would affect demand for our product.” (Id.)
On August 5, 2005, XM filed its interim quarterly financial report, Form 10-Q, for the second quarter of 2005. 2 The 10-Q stated that during the second quarter, XM continued to “grow [its] gross margin ... while reducing [its] costs to acquire each new subscriber.” (Id. ¶ 64.) The form also reported the SAC and CPGA numbers that had been announced on July 28. It noted that “timing of promotions and new contracts may cause SAC to fluctuate from period to period,” and “timing of media campaigns and discretionary advertising spending may cause CPGA to fluctuate from period to period,” but the form stated that the company expected both SAC and CPGA “to decline in 2005 as compared to 2004.” (Id.) The 10-Q also stated: “We are pursuing a business plan designed to increase subscribers and revenues while reducing or maintaining subscriber acquisition costs.” 3 (Id.)
Plaintiffs claim that these statements “were each materially false and misleading when made as they misrepresented and/or omitted adverse facts which then existed!,] and disclosure of which was necessary to make the statements not false and/or misleading.” (Id. ¶ 65.) Specifically, plaintiffs allege that Panero and other XM officials then knew, based upon their “access to and review of internal XM data,” that XM “would be forced to spend extraordinarily large sums of money in the fourth quarter of 2005” because of “competitive factors,” including the arrival of Howard Stern at Sirius, in order to achieve its year-end goal of six million subscribers, and that XM was accordingly planning to spend large sums on the Listen Large campaign in the fourth quarter of 2005, which would cause SAC and CPGA to increase dramatically. (Id.) Plaintiffs argue that XM failed to disclose these planned expenditures to the market, despite knowing that the market expected SAC and CPGA to decline in the second half of 2005 because of XM’s statements “highlighting” its ability to increase subscribers while reducing subscriber acquisition costs. (Id.)
II. October 27, November 1, and November 7, 2005 Statements
On October 27, 2005, XM issued a press release announcing its third quarter results and reaffirming its six million year-end subscriber guidance. (Id. ¶ 67.) It reported that SAC had decreased to $53 compared to $57 in the third quarter of *171 2004, while CPGA was stable at $89 in the third quarters of both 2004 and 2005. (Id.) The press release also stated that “XM expects to accelerate its subscriber and revenue growth through the fourth quarter.” (Id.) Also on October 27, 2005, XM hosted a conference call to discuss its third quarter results and financial outlook. (Id. ¶ 68.) During that call, Panero stated:
The secret to XM’s smart subscriber growth rather than growth at any cost is the ability to control marketing and product expenses while rapidly growing subscribers. This quarter, XM kept its fully loaded per unit costs of capturing a new subscriber, or CPGA, constant at $89 — the same CPGA we reported in the third quarter last year. These results provide us the flexibility to aggressively advertise and market our service in the fourth quarter. And in fact, that is what we are doing — implementing a comprehensive media campaign comprised of advertisements, rebates, and other promotional techniques to fully exploit the holiday selling season again this year.
(Id.) Similar to his comments in the August conference call, Euteneuer stated that “XM’s targeted and efficient sales and marketing efforts have enabled [them] to continue to demonstrate cost-effective subscriber growth,” reflected in decreased SAC and stable CPGA as compared to the third quarter of 2004, but he also warned that “[s]imilar to past trends, [they] expect fourth quarter SAC and CPGA to increase due to greater media and promotional activities during the upcoming holiday season.” 4 (Id.) Euteneuer also reaffirmed the six million year-end subscriber guidance. (Id.) Later in this conference call, the XM representatives were asked about the potential effects of the increased “level of rebating” for XM’s radios going into the holiday season. (Id. ¶ 70.) Steve Cook, an XM representative, replied that their “intent there is ... to hit lower and lower price points [on their radios] to really penetrate the mass-market,” and that these subsidies on XM’s hardware would be reflected in SAC. (Id.) He further remarked that XM “can maintain [its] SAC at very reasonable levels and still hit some of these attractive consumer price points.” 5 (Id.)
On November 1, 2005, XM issued a press release “highlighting” the fact that it had increased its retail market share to 59% in the third quarter of 2005, compared to 56% in the second quarter. (Id. ¶ 72.) In the press release, Panero is quoted as saying “XM continues to expand its leadership position while adding subscribers at about one-third the cost of our competitor.” (Id.) Then on November 7, 2005, XM *172 filed its 10-Q form reporting financial results for the third quarter of 2005, which were “substantially similar” to those reported in the October 27th press release, and reflected decreased SAC and stable CPGA as compared to third quarter of 2004. (Id. ¶ 73.) The 10-Q stated that XM had continued to “grow [its] subscription margin ... while reducing [its][s]ub-scriber acquisition costs,” and that XM was “pursuing a business plan designed to increase subscribers and revenues while reducing or maintaining subscriber acquisition costs.” (Id.)
Plaintiffs again argue that these statements were false and misleading when made because they misrepresented and/or omitted adverse facts. (Id. ¶ 74.) Specifically they allege that XM knew that it was planning to spend “extraordinary sums of money” on its Listen Large campaign in the fourth quarter, and that “XM was expecting fourth quarter SAC and CPGA to soar above historical levels, in complete reversal of the declining cost trends touted by defendants.” (Id. ¶¶ 74, 95.) They also argue that defendants knew that XM was “deeply discounting radios and offering steep subsidies in order to combat supply shortages and inflate subscription numbers,” which they knew would contribute to a sharp increase in fourth quarter SAC and CPGA. (Id. ¶ 74.) Plaintiffs further allege that Euteneuer’s statement that a fourth quarter increase in SAC and CPGA would be “[similar to past trends” of the holiday season “gave the market a false indication of the true impact that the Listen Large campaign and competitive forces would have on XM’s financial performance in the fourth quarter.” (Id. ¶ 74.)
Plaintiffs do not challenge the accuracy of any of the second and third quarter financial numbers reported by the company in the statements quoted above. Instead, plaintiffs claim that these reports “caus[ed] the market to expect and anticipate that XM’s SAC and CPGA would continue to decline,” while the company knew that SAC and CPGA would rise significantly. (Compl. ¶ 85; see PL Opp. at 6, 10.) Plaintiffs also argue that even if defendants’ public statements were literally true, they were nonetheless “false and misleading because they failed to provide investors with the known facts concerning XM’s choice to abandon its strategy of decreasing its key SAC and CPGA metrics with achieving rapid subscriber growth.” (PI. Opp. at 14.)
Plaintiffs also allege that Panero and other XM insiders took advantage of XM’s artificially inflated price to “unload vast sums of XM stock in order to reap millions of dollars in gain from illicit insider trading” during the class period. (ComplJ 85.) Specifically, the complaint alleges that Panero sold 99% of his then-owned XM shares during the fourth quarter of 2005, 6 and it makes similar claims about four other XM insiders. (Id. ¶¶ 88, 89.)
III. Fourth Quarter and Year-End 2005 Results
On February 16, 2006, XM issued a press release announcing its financial results for the fourth quarter of 2005 and year-end 2005. (Compl.fl 75.) SAC and *173 CPGA both increased significantly in the fourth quarter: SAC was $89, compared to $64 in the same period in 2004 and compared to $58 in the third quarter of 2005. (Id. ¶¶ 75, 77.) Fourth quarter CPGA was $141, compared to $104 in the same period in 2004 and $89 in the third quarter of 2005. (Id. ¶¶75, 77.) The press release attributed these increases “primarily ... to higher marketing expenses to meet a one-time competitive event in the fourth quarter.” (Id. ¶ 75.) For full-year 2005, SAC was $64, compared to $62 in 2004, and CPGA was $109, compared to $100 in 2004. (Id.) XM predicted decreased SAC and CPGA in 2006 due to “a more normalized market environment.” (Id.) When this information was revealed to the market, plaintiff alleges, it “caus[ed] XM’s stock price to drop approximately 13% on abnormally high trading volume.” (Id. ¶ 98.)
Also on February 16, 2006, XM announced the resignation of Pierce J. Roberts, a member of XM’s Board of Directors. (Id. ¶ 79.) Roberts’ resignation letter, dated February 13, 2006, stated that he had “been troubled about the current direction of the company and [did] not believe that it is in the best interests of the company’s shareholders,” and that he had made his “analyses and observations known in an increasingly vociferous manner to the Board and a number of senior managers of the Company.” (Id.) He further stated that he believed that there was “a significant chance of a crisis on the horizon.” (Id.) When it announced the resignation on February 16, XM stated that “the Company believes that the disagreement with Director Roberts primarily involves the strategic balance of growth versus cash flow,” and that “Director Roberts has historically favored more stringent cost control in the Company, specifically involving lower marketing, programming and promotional expenditures.” (Id. ¶ 80.) Plaintiffs allege that XM’s expensive marketing campaigns were “major factors” that led to Roberts’ resignation, and that the resignation is further proof that XM’s spending was out of control in the fourth quarter. (PI. Opp. at 9.)
Defendants have moved to dismiss plaintiffs complaint under the PSLRA and Rule 9(b), arguing, inter alia, that plaintiffs have not alleged with sufficient particularity why the quoted statements were materially false or misleading; that the statements on which plaintiffs premise their claim were forward-looking in nature and protected by the PSLRA’s safe harbor provision for forward-looking statements; that plaintiffs claims are actually premised upon hindsight disagreement with XM’s business decisions, not on fraud; and that plaintiffs have failed to satisfy the PSLRA’s requirement that they plead facts giving rise to a “strong inference” that defendants acted with the requisite scienter. (Def. Mot. at 2.) The thrust of defendants’ argument is that XM accurately reported its financial results to the market, and did in fact warn the market in October that they expected subscriber acquisition costs to rise in the fourth quarter of 2005 due to aggressive marketing during the holiday season. (Def. Mem. in Supp. at 1.) Indeed, they argue, based on their disclosures, market analysts predicted the increase in XM’s costs, and in fact, one Deutsche Bank analyst report from October 28, 2005 predicted with near-perfect accuracy the SAC and CPGA 2005 metrics that were released in 2006. 7 (Id. at 2.) And because SAC and CPGA cannot finally be calculated until it is determined *174 how many new subscribers the company acquired for that period, the company could not have known that SAC and CPGA would rise substantially until the new subscriber counts for the fourth quarter, which were lower than XM projected, were known after the end of 2005. (Id.) At best, defendants argue, plaintiffs claims are based on XM’s “positive descriptions of its past successes or expressions of corporate optimism regarding the Company’s ability to achieve ‘rapid and cost effective growth,’ ” neither of which is actionable under § 10(b). (Id. at 2-3.)
Plaintiffs’ opposition to the instant motion insists that “this action is not about missed cost or subscriber projections, a failure to update those projections, or even a disagreement with [defendants’ business judgment....” (Pl. Opp. at 1-2.) Instead, plaintiffs’ claims are essentially based on defendants’ alleged failure “to disclose to the market that they had undertaken a fundamental shift in XM’s business model during the Class Period to combat a serious competitive threat posed by its competitor, Sirius.... ” (Id. at 2.) Specifically, plaintiffs argue that throughout the class period defendants misled the market regarding “(1) the Company’s ability to achieve rapid growth with sound performance; (2) the Company’s key metrics remaining stable in the second half on 2005 and [declining] as compared to 2004; and (3) the Company’s business plan to increase subscribers and revenues while reducing or maintaining subscriber acquisition costs.” (Id. at 14.)
ANALYSIS
I. Standard of Review
In reviewing a motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6), a court must construe the complaint liberally in plaintiffs’ favor, and afford plaintiffs all reasonable inferences that can be derived from the facts alleged.
See Schuler v. United States,
*175 II. Securities Fraud under Section 10(b), Rule 10b-5 and the PSLRA
Section 10(b) provides that it is unlawful “[t]o use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.” 15 U.S.C. § 78j(b). Rule 10b-5 is the implementing regulation for § 10(b), and provides that it is unlawful, in connection with the purchase or sale of a security:
(a) To employ any device, scheme, or artifice to defraud.
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person ...
17 C.F.R. § 240.10b-5. To state a claim under § 10(b) and Rule 10b-5, a complaint must include six elements: (1) a material misstatement or omission, (2) scienter — an intent to deceive or defraud, (3) in connection with the purchase or sale of a security, (4) through the use of interstate commerce or a national securities exchange, (5) upon which plaintiffs relied, and (6) which caused injury to plaintiffs.
In re Baan Co. See. Litig.,
Because a claim under § 10(b) involves fraud, Fed.R.Civ.P. 9(b) requires plaintiffs to plead “the circumstances constituting fraud” with particularity. To satisfy this requirement, plaintiffs must “state the time, place, and content of the false misrepresentations, the fact misrepresented and what was retained or given up as a consequence of the fraud.”
Kowal,
The PSLRA also heightened the requirement for pleading scienter so that plaintiffs must “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2). The D.C. Circuit has not yet addressed
*176
how the PSLRA’s scienter requirement may be established,
see In re Interbank Funding Corp. Sec. Litig.,
It is clear that not every corporate prediction that does not come to fruition is actionable as securities fraud. Securities fraud claims may not be based on “fraud by hindsight” — in other words, “there is no reason to assume that what is true at the moment plaintiff discovers it was also true at the moment of the alleged misrepresentation, and that therefore simply because the alleged misrepresentation conflicts with the current state of facts, the charged statement must have been false.”
In re GlenFed Sec. Litig.,
Moreover, only “material” false or misleading statements or omissions are actionable under § 10(b). 17 C.F.R. § 240.10b-5(b). A statement or omission is material if a reasonable investor would consider it important in deciding whether to buy or sell a stock.
See TSC Indus., Inc. v. Northway, Inc.,
In addition, the PSLRA explicitly created a “safe harbor” to shield defendants from liability for certain “forward-looking statements.” 15 U.S.C. § 78u-5(c). Forward-looking statements include statements about financial projections, management’s plans and objectives for future operations, future economic performance, and the assumptions underlying or relating to any of these types of statements.
Id.
§ 78u-5(i)(l). Under the PSLRA’s safe harbor provisions, defendants may avoid liability for such oral or written statements if (1) “the statement is identified as a forward-looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement,” or if the statement is immaterial; or (2) if plaintiffs fail to prove that the statement was made with “actual knowledge” that it was “false or misleading.”
Id.
§ 78u-5(c)(l)(A)-(B). To be considered “meaningful,” cautionary language must be substantive and tailored to the specific predictions made in the allegedly misleading statement.
See In re Donald J. Trump Casino Sec. Litig.
— Taj
Mahal Litig.,
Furthermore, there is no general duty on the part of a company to provide the public with all material information.
See In re Burlington Coat Factory Sec. Litig.,
III. XM’s Alleged Material Misstatements or Omissions
Plaintiffs characterize their complaint as “delineating] a simple case of securities fraud based on misrepresentations concerning a concealed change in business philosophy.” (Pl. Opp. at 2). The Court cannot agree, for plaintiffs have failed to allege any actionable material misstatement or omission. 10 Plaintiffs claims are essentially based on two types of statements quoted in their complaint: (1) statements relating to XM’s pursuit of “cost effective” growth, and (2) statements offering specific predictions of a decrease or stabilization of SAC and CPGA in the second half of 2005. The Court will address each of these types of statements seria-tim. 11
*179 A. XM’s Statements about its “Cost Effective” or “Efficient” Growth Strategy
The majority of the allegedly misleading statements in plaintiffs’ complaint relate to what plaintiffs characterize as XM’s purported pursuit of “cost effective growth.” (Pl. Opp. at 14; see, e.g., Compl. ¶ 59 (“Efficient Quarterly Subscriber Growth”); Id. ¶ 60 (“And the ultimate test, we are achieving rapid growth with sound financial performance.”); Id. ¶ 64 (“We are focused on increasing subscribers and scaling our business while managing growth and containing costs.... We are pursing a business plan designed to increase subscribers and revenues while reducing or maintaining subscriber acquisition costs.”); Id. ¶ 68 (“The secret to XM’s smart subscriber growth rather than growth at any cost is the ability to control marketing and product expenses while rapidly growing subscribers.”); Id. ¶ 73 (“We are pursuing a business plan designed to increase subscribers and revenues while reducing or maintaining subscriber acquisition costs.”).) Plaintiffs argue that these statements were rendered misleading because during the class period XM decided to “abandon” its “cost effective growth business strategy,” and that because the company had made affirmative statements “touting [its] ability to achieve rapid subscriber growth as its key SAC and CPGA metrics would continue to decline,” defendants had a duty to disclose the alleged change in strategy to the market. (PI. Opp. at 8, 21-22, 33.) “Put simply, [plaintiffs claim that, once [defendants undertook the fundamental shift to their business model, they needed to disclose it and the adverse effects they knew or recklessly disregarded it would have on the Company’s key financial metrics.” (Pl. Opp. at 24.)
First, even assuming
arguendo
that plaintiffs have alleged sufficient facts to show that XM did in fact “abandon” its cost effective growth strategy during the class period, its failure to disclose that change would not be misleading because the language XM used to describe what the plaintiffs call its “cost effective growth strategy” was merely
puffery
— ie., it was so vague and incapable of objective verification as to be immaterial as a matter of law.
See Grossman,
Because such generalized positive statements about “cost effective,” “smart,” “sound” and “efficient” growth are vague and incapable of objective verification, they are not the type of statement upon which a reasonable investor would rely “in considering the ‘total mix’ of facts available,”
In re Scientific-Atlanta, Inc. Sec. Litig.,
Moreover, despite the optimistic language about cost effective growth cited in the complaint, no reasonable investor would have expected SAC and CPGA to decline in the fourth quarter of 2005 — as plaintiffs argue XM “conditioned the market to believe”
(see
Pl. Opp. at 18; Compl. ¶¶ 7, 76) — because XM told the market in October of 2005 that those numbers would
rise
in the fourth quarter because of aggressive marketing (as apparently had been the trend in previous fourth quarters). Specifically, during the October 27, 2005 conference call, Panero stated that XM’s low third quarter CPGA “provide[d] us the flexibility to aggressively advertise and market our service in the fourth quarter. And in fact, that is what we are doing — implementing a comprehensive media campaign comprised of advertisements, rebates, and other promotional techniques to fully exploit the holiday selling season
*181
this year.” (Comply 68.) On that same call, Euteneuer stated: “Similar to past trends, we expect fourth quarter SAC and CPGA to increase due to greater media and promotional activities during the upcoming holiday season.”
(Id.
¶ 69.) Plaintiffs argue that these disclosures led the market to believe that the increase in holiday advertising would be similar in scale to previous years, but in actuality it was much higher, and they allege that at that point defendants had a duty to “speak the full truth” and disclose to the market that XM had “abandoned” its “cost effective growth business strategy” for a “growth at any cost approach.” (PI. Opp. at 13-16.) But in disclosing this accurate information about its rising fourth quarter marketing costs, XM had no duty to couch these disclosures in the particular pejorative terms that the plaintiffs now
suggest
— i.e. that these expenditures were cost ineffective or that they were undertaken pursuant to a “growth at any cost approach.” “[A] company has no duty to disparage its own competitive position in the market where it has provided accurate hard data from which analysts and investors can draw their own conclusions about the company’s condition and the value of its stock.”
In re N.Y. Cmty. Bancorp, Inc. Sec. Litig.,
*182
The fact that at least one investment bank’s analysts accurately predicted XM’s full-year SAC and CPGA following the company’s October statements about aggressive holiday marketing bolsters the Court’s conclusion that XM’s positive language about its “cost effective” and efficient growth amounted to no more than puffery.
See Grossman,
*183
In addition, plaintiffs have failed to allege sufficient facts to establish that there was indeed a “fundamental shift” in XM’s business model that could render plaintiffs statements about cost containment and cost effective growth misleading. The PSLRA requires plaintiffs to “plead with particularity
sufficient
facts to support [their] beliefs” as to why defendants’ statements were misleading,
see Novak v. Kasaks,
While these facts may demonstrate why it was ultimately impossible for XM to meet its financial goals for the fourth quarter and for full-year 2005, they do not establish that the defendants had, at the time the alleged misstatements were made in July, August, October and November 2005, made a “choice to abandon” XM’s “cost effective growth business strategy.” (Pl. Opp. at 14-15.) Significantly, defendants did not and could not have known what their subscriber acquisition costs for the fourth quarter would be until after that period was over and the number of newly acquired subscribers was known. Moreover, though plaintiffs allege that XM’s fourth quarter marketing costs were “fully budgeted well in advance,” (Comply 51), they do not allege
when
these expenses were budgeted or
how much
was budgeted for them. Indeed, elsewhere plaintiffs allege that XM’s fourth quarter marketing costs “spiraled out of control.”
(See
Pl. Opp. at 9, 15.) If fourth quarter spending was in fact “out of control,” it would certainly support a claim of company mismanagement, but it would also mean that the extent of XM’s fourth quarter expenditures was
not
known in advance by the company’s executives. Nor do plaintiffs allege any additional facts to support their belief that XM had abandoned its so-called “cost effective
*184
growth strategy” at the time of the allegedly misleading statements:
e.g.,
they point to no internal memoranda or reports or any other documentary evidence that would indicate that such a change had occurred. Because they fail to plead sufficient facts to support an inference that there had been a dramatic change in business strategy at the time each of the allegedly misleading statements were made, plaintiffs’ allegations that throughout the class period defendants “knew or were severely reckless in ignoring that XM was planning to spend extraordinary sums of money ... in the fourth quarter of 2005, which would cause XM’s SAC and CPGA to increase dramatically,”
(see
Compl. ¶ 74) fall short of the heightened pleading requirements of the PSLRA and Rule 9(b).
See Shekoyan v. Sibley Int’l Corp.,
B. XM’s Predictions of Decreased SAC and CPGA for Full-Year 2005
Though plaintiffs insist that “this action is not about missed cost or subscriber projections” (PI. Opp. at 1), the complaint alleges that XM’s predictions of declining or stabilizing SAC and CPGA made after the close of the second quarter of 2005 were false, and that XM knew the statements to be false when they were made. (See Compl. ¶ 65; Pl. Opp. at 14 (“Throughout the Class Period, Defendants made false and misleading statements regarding ... the Company’s key metrics remaining stable in the second half of 2005 and to decline as compared to 2004.”).) These more specific predictions about SAC and CPGA trends for the second half of 2005 differ in kind from the general statements about “cost effectiveness” and “efficiency” discussed supra, and they are subject to a slightly different analysis.
In conjunction with XM’s announcement of its second quarter financial results, during the July 28, 2005 conference call, Eu-teneuer stated: “We expect CPGA to remain stable during the second half of the year.” (Comply 61.) On the same phone call, an unidentified XM representative reiterated that “we do think CPGA will be stable,” but noted that “you can see SAC bounce around a bit depending upon what your actual hardware subsidy elements are on any given time frame.” (Id. ¶ 62.) The company’s August 5, 2005 10-Q form then stated that the company “expect[edj” both SAC and CPGA “to decline in 2005 as compared to 2004.” (Id. ¶ 64.) Plaintiffs allege that these predictions were false when made because defendants then knew, “or disregarded with severe recklessness,” that XM would be forced to spend “extraordinarily large sums of money in the fourth quarter of 2005” to meet its subscriber targets in the face of “competitive *185 factors” such as the arrival of Howard Stern at Sirius, and that these fourth quarter expenditures “would cause XM’s SAC and CPGA to increase dramatically.” (Id. ¶ 65.)
An examination of the July 28 and August 5, 2005 statements reveals that the SAC and CPGA predictions were forward-looking statements accompanied by effective cautionary language, and therefore they are non-actionable under the bespeaks caution doctrine and/or the PSLRA’s safe harbor. The safe harbor protects individuals and corporations from liability for forward-looking statements that prove false if the statement is “accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement.” 15 U.S.C. § 78u-5(e)(l)(A)(i). A company need not list all factors that might affect financial results,
Helwig,
Though the relevant language is not quoted in the complaint, at the beginning of the July 28, 2005 conference call, XM’s general counsel cautioned: “Before we begin our prepared remarks, I would like to remind everyone that certain information on this call may contain forward-looking statements. Due to a number of factors, our actual results may differ materially from those projected in such forward-looking statements. Those factors include future demand for the Company’s service. ...” (Valentine Decl. Ex. J [XM 2Q05 Conference Call Tr. (July 28, 2005) ] at 2.) Similarly, XM’s August 5, 2005 10-Q form stated: “Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will be achieved.... Our costs may exceed or our revenues may fall short of our estimates, our estimates may change, and future developments may affect our estimates.... The timing of promotions and new contracts may cause SAC to fluctuate from period to period.... The timing of our media campaigns and discretionary advertising may cause CPGA to fluctuate from period to period.” (Valentine Decl. Ex. M [Aug. 5, 2005 Form 10-Q] at 17, 19, 25.) These warnings “relate directly to [the language] by which plaintiffs claim to have been misled,”
In re Donald J. Trump Casino,
Moreover, for substantially the same reasons as described in the prior section, plaintiffs fail to allege sufficient facts to establish that these predictions of SAC and CPGA trends lacked a reasonable basis when made. In
Kowal,
the D.C. Circuit noted that “[f]inancial projections and generalized statements of optimism represent management’s opinion of how the company is expected to perform within a defined time frame.... Such projections are not guarantees of future financial performance, nor are they understood as such by reasonable investors.”
Kowal,
In sum, defendants’ predictions about declining or stabilizing SAC and CPGA are not actionable because these forward-looking statements, which were accompanied by meaningful cautionary language, are protected by the PSLRA’s safe harbor and/or the common law bespeaks caution doctrine, and also because plaintiff has failed to plead sufficient facts to suggest that these statements lacked a reasonable basis when made
CONCLUSION
For the foregoing reasons, the Court concludes that plaintiffs have failed to identify any materially misleading statements or omissions that are actionable under § 10(b). Accordingly, defendants’ Motion to Dismiss is granted and the case is dismissed with prejudice.
ORDER
For the reasons set forth in the accompanying Memorandum Opinion, defendants’ Motion to Dismiss [Dkt. #44] is hereby GRANTED, and the case is DISMISSED WITH PREJUDICE.
So ordered.
Notes
. By order dated August 1, 2006, Boca Raton Firefighters and Police Pension Fund and Plumbers Local 267 Pension Fund were appointed lead plaintiffs in this action.
. XM's 10-Q forms were signed by Panero.
. A number of financial analysts remarked on the SAC and CPGA improvements, which were "ahead of expectations," and based on XM's prediction that subscriber costs would remain stable for the rest of the year, some predicted that earnings would improve and SAC and CPGA would continue to fall in 2005. (See Compl. ¶ 63.)
. Thereafter, on November 14, 2005, XM publicly announced the launch of its Listen Large campaign, aimed at combating competition from Sirius and the upcoming arrival of Howard Stern. (See Valentine Decl. Ex. R. [Brian Steinberg, Advertising: XM Aims to Neutralize Sirius, Stem, Wall St. J. (Nov. 14, 2005)1 at B8.)
. After these statements were made, analysts from Lehman Brothers, Deutsche Bank, and Bear Stearns issued reports predicting that SAC and CPGA would rise because of more extensive marketing efforts in the fourth quarter. (Comply 71.) The Lehman Brothers analysts stated that they believed that "the Street [was] underestimating 4Q marketing spending.” (Valentine Decl. Ex. O at 2.) Deutsche Bank raised its full-year estimate for SAC from $58 to $62, and raised its full-year estimate for CPGA from $103 to $108. (Compl.$ 71(c).) The Bear Stearns report, noting that XM reported lower than expected marketing expenses during the third quarter, remarked that "[h]igher marketing expense in 4Q does not imply the economic model has broken down. XM ... effectively shifted the [3Q] marketing dollars to 4Q05.” (Id. ¶ 71(d).) Bear Stearns expected total marketing outlay to remain the same for the year based on XM's guidance. (Id.)
. This allegation appears to be somewhat misleading, however, as plaintiffs’ calculation of Panero’s stock sales does not take into account the entirety of Panero’s XM securities holdings. Defendants explain that Panero exercised vested stock options and then immediately sold the resulting stock, so plaintiffs are technically correct that he sold nearly 100% of his stock. (See Def. Mem. in Supp. at 32 n. 30.) However, according to defendants, when all of Panero’s vested, exercisable stock options and convertible debt holdings are considered, he sold only 27.1 % of his holdings of XM securities at the time. (Id. at 32.)
. The Deutsche analyst predicted 2005 SAC would be $62 (in actuality it was $64) and that 2005 CPGA would be $108 (in actuality it was $109). (Compl.lHI 71(c), 75.)
. Plaintiffs do not object to the Court taking judicial notice of the "existence” of the SEC filings, press releases, analyst reports and conference call transcripts upon which plaintiffs rely in their complaint, but they do object to the Court relying on these documents "to prove the truth of the matters asserted therein.” (PL Opp. at 39.) It is well-established that a court "may consider the full text of the SEC filings, prospectus, analysts’ reports and statements 'integral to the complaint,’ even if not attached, without converting the motion into one for summary judgment under Fed. R.Civ.P. 56.”
Bovee v. Coopers & Lybrand C.P.A.,
. As defendants point out,
Virginia Bank-shares
addressed the question of whether false statements of reasons, opinion, or belief, may support claims under § 14(a) — not § 10(b)— of the Securities Exchange Act of 1934. (Def. Reply at 12.) However, courts routinely follow rules adopted under § 14 when analyzing claims under § 10(b).
See Mayer v. Mylod,
. Because this determination is dispositive of plaintiffs' securities fraud claims, the Court need not address the issue of whether plaintiffs have adequately alleged that defendants acted with the required scienter, or whether plaintiffs can state a "controlling person” claim against Panero under § 20(a).
See Fidel,
. As a preliminary matter, the Court notes that many of the statements quoted in the complaint are simply reports of certain financial results for the second and third quarters of 2005, including subscriber numbers, net losses, revenues, SAC and CPGA.
(See, e.g.,
Compl. ¶¶ 59, 60, 61, 64, 67, 73.) Plaintiffs do not contest the accuracy of any of these
*179
reports, but state that they include these statements in the complaint “to demonstrate XM’s stated business model and to show how [defendants conditioned the market, through affirmative statements, to expect the application of the Company's stated business model to produce consistent results — declining or stabilizing SAC and CPGA.” (PI. Opp. at 18.) Moreover, "an accurate report of past successes does not contain an implicit representation that the trend is going to continue,”
Burlington Coat Factory,
. To the extent that plaintiffs' complaint is based on the idea that XM failed to inform the market of the competitive pressures brought to bear by Sirius and their promotion of Howard Stern in the fourth quarter of 2005, those alleged omissions are also immaterial as a matter of law.
(See
Pl. Opp. at 18-19 ("Defendants’ Class Period statements were undermined by the looming threat of Howard Stern and the corresponding severely increased competition and media blitz from Sirius.”);
Id.
at 15 ("Defendants were aware of crucial
*182
facts, namely increased competition and the imminent arrival of Howard Stern at Sirius, regarding XM’s inability to reduce costs of adding critical new subscribers as it attempted to reach its goal of 6 million subscribers by year-end 2005, which Defendants recklessly disregarded was contrary to the market expectations they had fostered.”).) In a "fraud on the market” case such as this one,
see Basic,
. Plaintiffs argue that under
Virginia Bank-shares,
statements such as these that "reflect the [defendants' opinions or 'subjective assessment’ ” are actionable if they lack "a factual basis that justifies them as accurate, the absence of which renders them misleading.” (PI. Opp. at 20-21 (quoting
In re Premiere Techs., Inc. Sec. Litig.,
No. 1:98-CV-1804-JOF,
. Plaintiffs mistakenly argue that these predictions are not protected by the PSLRA’s safe harbor because defendants knew them to be false or misleading when made. (Pl. Opp. at 27.) The PSLRA protects forward-looking statements if: (1) "the statement is identified as a forward-looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement,” or if the statement is immaterial;
“or
" (2) if plaintiffs fail to prove that the statement was made with "actual knowledge” that it was “false or misleading.” 15 U.S.C. § 78u-5(c) (emphasis added). The provision is worded disjunctively: the forward-looking statement must either be accompanied by meaningful cautionary language,
or
plaintiffs must fail to prove that it was made with actual knowledge of its falsity. Accordingly, courts have held that once the first clause of the provision is satisfied, "the defendants’ state of mind is not relevant.”
Kurtzman,