Commercial Division Blog

Posted: November 7, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Christopher R. Dyess, Joshua Wurtzel, Hillary S. Zilz / Categories Commercial, Securities

Plaintiff Did Not Allege Violation Of The Securities Act of 1933

In an Opinion, dated October 24, 2022, in Lorenzo v. Bluecity Holdings Ltd, Index No. 652894/2021, 2022 NYL Slip Op 51055(U), Justice Andrew Borrok dismissed Plaintiff’s amended complaint which asserted causes of action under the Securities Act of 1933 in connection with the Defendant’s IPO.  The Court explained:

The gravamen of the AC is that the Offering Documents were materially misleading because (i) they failed to disclose that the Company intended to discontinue (x) its family planning business Bluedbaby which contributed less than 1% of the Company's total net revenues (NYSCEF Doc. No. 31) and (y) a location-based social networking app targeting the lesbian community called LESDO (NYSCEF Doc. No. 25, P 59) which amounted to a $ 900k write-off when discontinued and (ii) they overstated the Company's ability to become profitable because they failed to disclose (x) the sizeable year-end bonuses that they were going to pay in the 4th quarter (many months later) and (y) the shift in customer base that they were planning to a large group of users with limited spending power. None of this as set forth in the AC is actionable.

The attorneys at Schlam Stone & Dolan frequently litigate issues concerning the Securities Act of 1933.  Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.