NEW YORK (Legal Newsline) - After denying two motions to dismiss, a New York federal judge has created a class of shareholders claiming they were harmed by wrongdoing at a company that designs online ordering systems.
On Dec. 1, Judge Jed Rakoff granted the class action plaintiffs' motion to certify a class of those who bought stock in Olo, Inc., between March 17, 2021,and Aug. 11, 2022. It's the latest win for securities lawyers who hope to punish the company for a drop in its stock price in August 2022.
Rakoff said he will explain his reasoning in an order in the future.
Suits allege that in August of 2021, Olo reported its "active locations" to demonstrate its business growth as having approximately 15,000 Subway locations, which caused its stock price to "soar" above $45 per share before falling.
The plaintiffs claim Olo misled investors and omitted material facts about Subway locations that were set to end their relationship with Olo.
Olo countered by claiming Subway generated only a few million dollars of its 2021 revenue of $150 million. The company receives a fee on online transactions from other large chains like Jimmy John's, Jack in the Box and Panda Express.
The litigation, which is led by the firm Scott + Scott, seeks compensation for investors like lead plaintiff Steamship Trade Association - International Longshoreman's Association.
Rakoff in July issued an order explaining why he allowed the case to move past the dismissal phase. When lawyers amended their complaint, Olo filed another motion to dismiss that was partially granted by Rakoff.
"To the extent plaintiff's claims are predicated upon the misstatement of Olo's active locations, defendant's motion to dismiss is denied," a September order says.
"However, to the extent plaintiff's claims are premised on misstatements about Subway, Olo's financial prospects, and Olo's prospects in the enterprise market, defendant's motion to dismiss is granted."
Though plaintiffs say the company was aware its Subway agreement was in peril and should have disclosed it to shareholders earlier, Olo said securities laws do not require disclosure of ongoing customer discussions "that could potentially sabotage an evolving business relationship before the outcome of those discussions was certain."
Lawsuits said Olo's misleading of the investing public led to the inflated price of the company's stock and that Olo "engaged in a scheme to deceive the market." The plaintiff alleges Olo's actions caused it to purchase Olo stock at artificially inflated prices since the stock price fell to $12.99 per share on Aug. 11 and fell to $8.26 per share on Aug. 12.