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Snap Inc.

Case Details

Class Period: April 23, 2021 - October 21, 2021
Date Filed: November 11, 2021
Case Number: 2:21-cv-8892
Jurisdiction: Central District of California
icon-casetype Case Type: Securities Case

Case Summary

On January 31, 2022, Saxena White was appointed Lead Counsel in the securities fraud class action against Snap Inc., and certain of its senior executives, for violations of the Securities Exchange Act of 1934. The Complaint alleges that Snap made materially false and misleading statements and failed to disclose adverse facts about the Company’s business, operations, and prospects, thus artificially inflating the Company’s stock price and causing investors to suffer substantial losses when the truth eventually emerged.

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 relevant time period, Snap’s most critical business segment was direct response, or DR, advertising, which consists of in-app ads that ask a user to take a specific action, such as downloading an app or making a purchase. Snap’s DR advertising business depended heavily 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, or 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 users expressly and affirmatively “opted in” to being tracked—a change that Apple referred to as App Tracking Transparency, or 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 highly 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, Snap’s former Chief Business Officer, Jeremi Gorman, provided investors with the reassurances 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 Gorman’s statements, 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, Snap revealed that these problems were so severe, the Company’s business would be materially impacted for at least the next year. These revelations stood in stark contrast to the previous reassurances about SKAN’s success that Snap had provided to investors. 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, over significant competition from the top law firms in our industry, the Court appointed Oklahoma Firefighters Pension and Retirement System as Lead Plaintiff and Saxena White as Lead Counsel.

On March 18, 2022, Lead Plaintiff filed its consolidated complaint.  Then, on May 3, 2022, Defendants filed a motion to dismiss the consolidated complaint. While briefing was underway, Lead Plaintiff requested leave to file a second amended complaint, which it filed on August 3, 2022. Defendants then moved to dismiss the second amended complaint.

On March 13, 2023, the Court granted the Defendants’ motion to dismiss, but allowed Lead Plaintiff another opportunity to amend the complaint. The Court also specifically explained that it took issue with the Defendants’ argument and noted that Lead Plaintiff had already “plausibly alleged a material misrepresentation,” as to Gorman’s statement about how Snap’s DR advertisers had successfully implemented SKAN.

On April 21, 2023, Lead Plaintiff filed its third amended complaint, which added significant refinement and detail to the fraud allegations and incorporated the Court’s prior order granting the Defendants’ motion to dismiss. The Defendants filed another motion to dismiss. On September 26, 2023, the Court granted Defendants’ motion to dismiss the third amended complaint.

On November 28, 2023, Lead Plaintiff filed its notice of appeal.  The case will now go before the United States Court of Appeals for the Ninth Circuit. On February 26, 2024, Lead Plaintiff filed the appellant opening brief.