The action is brought on behalf of all persons and entities who purchased or otherwise acquired Snap Inc. (“Snap” or the “Company”) publicly traded securities, and/or sold Snap put options, between April 23, 2021 and October 21, 2021, inclusive (the “Class Period”). The action asserts claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, against Snap and its former Chief Business Officer Jeremi Gorman (“Gorman”), and under Section 20(a) of the Exchange Act against Gorman and Snap’s CEO Evan Spiegel.
Snap is a social media company whose primary product is a free mobile chatting application called Snapchat. Snap’s revenue depends entirely on advertising. Both before and during the Class Period, the most critical segment was “direct response” or “DR” advertising, which consisted of in-app ads that would ask the user to take a specific action, such as downloading an app or making a purchase. Snap’s DR advertising business heavily depended on the Company’s ability to track users’ activity on their devices. This tracking on Apple devices was enabled through a system known as “Identifier for Advertisers” (“IDFA”).
In June 2020, Apple announced that app companies like Snap would no longer be able to use IDFA to track user activity on Apple devices unless those users expressly and affirmatively “opted in” to being tracked—a change that Apple referred to as “App Tracking Transparency” (“ATT”). Because users would most likely not consent to being tracked, industry observers expressed concern that the ATT changes could significantly harm Snap and other social media companies whose DR advertising revenue was dependent on IDFA’s tracking capabilities. While Apple offered an alternative tool known as SKAdNetwork (or “SKAN”) that would purportedly allow Snap and its advertisers to continue to target and measure advertising, investors were concerned that SKAN would not provide the functionality to be a viable ad tracking tool.
As Apple was finally rolling out ATT in late April 2021 at the outset of the Class Period, Defendant Gorman provided investors with the reassurance for which they had been seeking. Specifically, on Snap’s April 22, 2021 earnings call, Gorman reassured the market that any prospective negative impact on Snap’s business from the ATT changes would be “mitigated” precisely because a “majority” of Snap’s critical DR advertisers had purportedly already “successfully implemented” SKAN for their Snap ad campaigns. On the strength of Defendant Gorman’s representations, Snap’s stock price soared, climbing 46% from a $57.05 closing price on April 22, 2021, to an all-time high closing price of $83.11 on September 24, 2021.
The truth emerged on October 22, 2021, when Snap stunned the market by announcing that, precisely because of massive problems that its advertisers were experiencing with SKAN, the Company would, for the first time in its history as a public company, miss the lower end of its revenue guidance. Moreover, these problems were so severe, Snap’s business would be materially impacted for at least the next year. On this news, Snap’s stock price collapsed, plummeting over 26% in one day—wiping out $27 billion in market capitalization.
On January 31, 2022, the Court appointed Oklahoma Firefighters Pension and Retirement System as Lead Plaintiff and Saxena White as Lead Counsel in this action.
On March 18, 2022, Lead Plaintiff filed its consolidated complaint. Defendants then filed their motion to dismiss the consolidated complaint on May 3, 2022. While briefing was underway, Lead Plaintiff requested leave to file a second amended complaint, which it filed on August 3, 2022. Defendants moved to dismiss the second amended complaint on September 19, 2022. Briefing of this motion to dismiss ended on December 1, 2022, and the Court held a hearing on the motion on March 13, 2023, where it adopted its tentative ruling granting the motion.
On April 21, 2023, Lead Plaintiff filed its third amended complaint which incorporated the Court’s determinations in its March 13, 2023 Order, which held that “Plaintiff ha[d] plausibly alleged a material misrepresentation.” Defendants shall file their motion to dismiss the Third Amended Complaint by June 9, 2023; Lead Plaintiff shall file its opposition to Defendants’ motion to dismiss by July 28, 2023; and Defendants shall file their reply in support of the motion to dismiss by August 25, 2023. The hearing on Defendants’ motion to dismiss is set for September 11, 2023 at 8:30 a.m.
