On January 29, 2025, Judge Robert Kirsch of the United States District Court for the District of New Jersey granted a motion to dismiss a securities action asserting claims under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 against a financial technology company (the "Company") and certain of its former officers. In re PayPal Holdings Inc. Sec. Litig., 22-cv-5864-RK (D.N.J. Jan. 29, 2025). Plaintiffs claimed that defendants misstated the Company's growth and future prospects, through statements concerning its Net New Active Accounts ("NNAs") and Total Payment Volume ("TPV"). The Court dismissed the action, holding that plaintiffs failed to adequately allege any material false or misleading statement.
The Court considered "fifteen sets" of alleged misstatements, which it categorized as covering the following five groups of purported statements: (1) "touting TPV growth", (2) "tout[ing the Company's] supposed NNA growth," (3) "touting NNA growth [that] counted illegitimate bot-accounts as legitimate NNAs," (4) "provid[ing] or confirm[ing the Company's] guidance as to future NNA growth," and (5) "tout[ing] engagement with [the Company's] services by NNAs and/or actual or expected reductions in churn due to such engagement." As to each category, the Court held that Plaintiffs failed to satisfy "the high bar of the PSLRA's exacting pleading requirement."
The Court held that plaintiffs failed to sufficiently allege that any of the statements were materially false or misleading. Among other points, the Court held that certain statements related to the Company's projections fell within the PSLRA's safe harbor for forward-looking statements and others amounted to inactionable "opinions and immaterial puffery."
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