Bar-Asher v. Playtika Holding Corp.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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IN RE PLAYTIKA HOLDING CORP. MEMORANDUM AND ORDER

SECURITIES LITIGATION 21-CV-6571 (RPK)(SJB)

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RACHEL P. KOVNER, United States District Judge:

Plaintiff brought this putative class action against Playtika Holding Corp., its current

officers and directors, and its underwriters, alleging violations of Sections 11 and 15 of the

Securities Act of 1933, 15 U.S.C. §§ 77k(a), 77o. The claims arise out of defendants’ alleged

failure to disclose an overhaul of two of Playtika’s most popular games, which was underway at

the time of the company’s initial public offering (“IPO”). Defendants moved to dismiss this

lawsuit under Federal Rule of Civil Procedure 12(b)(6). See Defs.’ Mem. in Supp. of Mot. to

Dismiss (Dkt. #61) (“Defs.’ Mem.”). For the reasons discussed below, defendants’ motion is

granted.

BACKGROUND

The following facts are drawn from the amended complaint and documents incorporated

by reference therein and are assumed true for the purposes of this order.

I. Playtika and Its IPO

Playtika is a technology company that develops free-to-play mobile games. Am. Compl.

¶ 1 (Dkt. #43). Its portfolio of games consists largely of “social casino” or “social casual” games,

such as slots, bingo, and poker. Ibid. Several are the number one grossing games in their

respective genres. Id. ¶ 184(e); Decl. of Marc. J. Schneider, Ex. A, Form S-1 Registration

Statement 104 (Dkt. #61-2) (“Form S-1”). Of those games, Slotomania and Bingo Blitz were the

most successful, making up around half of Playtika’s revenue in 2018, 2019, and most of 2020.

Am. Compl. ¶ 115.

Playtika generates more than 97% of its revenue by enticing players to make in-game

purchases of virtual items such as chips, tokens, coins, and other digital items. Id. ¶¶ 2, 49, 73.

Of Playtika’s over 11 million daily active users, only around 2.5% make in-game purchases.

Id.¶ 85. In order to keep revenue flowing, Playtika has to consistently create new in-game features

to keep this group of users engaged. Id. ¶ 7.

On December 18, 2020, in connection with an anticipated IPO, Playtika filed a Form S-1

Registration Statement with the SEC. Id. ¶ 54. It amended the form on January 7, 2021. Ibid. On

January 14, 2021, the SEC declared the Form S-1 effective. Ibid. The following day, Playtika

launched its IPO, and the company’s stock began trading on the NASDAQ under the ticker symbol

“PLTK.” Id. ¶ 56.

As part of its Registration Statement, Playtika described the “Key Factors Affecting [Its]

Business.” Form S-1 at 75–76. Playtika stated that it generated substantially all its revenue from

the group of players who purchase in-game virtual items, and that the “players’ willingness to

consistently make in-app purchases is impacted by [Playtika’s] ability to deliver engaging content

and personalized user experiences.” Ibid.; Am. Compl. ¶ 101(a). In explaining its business model,

under the “Feature Development” section, Playtika noted its expertise in “creating features and

player experiences that optimize player engagement, resulting in increased conversion and

monetization.” Form S-1 at 104; Am. Compl. ¶ 95. Playtika further stated that it was “focused on

continuing to implement and enhance features that keep games fresh and increase user

engagement.” Ibid. Thus, it explained, “[t]hroughout the lifecycle of [its] games, [the company]

dedicate[s] substantial operational resources and team members to support a constant cadence of

novel content and feature creation that drives conversion and continued monetization.” Form S-1

at 104; Am. Compl. ¶ 97(a).

Playtika emphasized the same point in a portion of the Registration Statement entitled

“How We Are Different.” Form S-1 at 97. It stated that Playtika “take[s] a fundamentally different

approach to operating games” by focusing on the games’ longevity and providing “a constant flow

of new content that is highly personalized to users based on their gameplay behavior.” Ibid.; Am.

Compl. ¶ 94.

Playtika also described various “Risk Factors” in the Registration Statement, including

“Risks Related to [Its] Business.” Form S-1 at 14. Playtika explained that the market for its games

“is characterized by rapid technological development” and “disruption by . . . evolving . . . industry

standards. As a result, [its] industry is constantly changing games and business models in order to

adopt and optimize new technologies.” Id. at 18. Playtika also stated that “Slotomania and Bingo

Blitz [] collectively generated more than half of [the company’s] revenue” in 2018 and 2019. Id.

at 15. It acknowledged that for those and other games to remain popular, Playtika “must constantly

enhance . . . and upgrade the game[s] with new features . . . and content that players find attractive.

As a result, each of [its] games requires significant product development, marketing and other

resources to develop, launch and sustain popularity through regular upgrades.” Ibid.

Playtika also described its “Risks Related to [Its] Information Technology and Data

Security.” Id. at 38. Playtika explained that “[its] ability to anticipate or respond to changing

technology and evolving industry standards and to develop and introduce improvements and

enhancements to games on a timely basis is a significant factor affecting [its] ability to remain

competitive.” Ibid. Playtika warned investors that the measures it would need to take to “adapt

to, and keep pace with, changes in technology” “can be costly and generate risk.” Ibid. It also

stated that “[it] cannot assure [investors] that [it] will achieve the necessary technological advances

or have the financial or other resources needed to introduce new games or improvements and

enhancements to games on a timely basis or at all.” Ibid. In addition, Playtika stated that “[its]

failure to develop or adjust to changes in technology, platforms, devices and operating models and

evolving industry standards could adversely impact [its] business.” Ibid.

In the same section, Playtika warned investors that (i) “from time to time,” Playtika would

engage in “systems integration or migration work” that could result in “interruptions, delays or

cessations of service,” id. at 41; (ii) it “could encounter difficulties in developing new systems,

maintaining and upgrading current systems,” id. at 40; and (iii) it “may not be successful in

implementing new systems and transitioning data, which could cause business disruptions,” id. at

41.

II. Playtika’s Post-IPO Performance

On November 3, 2021, Playtika released its financial results for the Third Quarter of 2021.

Am. Compl. ¶ 193. Playtika disclosed that its actual revenue for that quarter was $636 million,

down from $659.2 million from the prior quarter. Id. ¶ 128. It also revised its full-year guidance

downwards. Ibid. Craig Abrahams, Playtika’s CFO, confirmed in an earnings call that “actual Q3

results were down 3.6% sequentially.” Id. ¶¶ 27, 195.

Abrahams explained that the lower revenue was due in part to “lower-than-expected

revenues” for two Playtika games, Board Kings and World Series of Poker. Decl. of Marc J.

Schneider, Ex. E, Q3 2021 Earnings Call Tr. 2 (Dkt. #61-6) (“Earnings Call Tr.”). He also

attributed the Third Quarter results to “comparatively fewer new promotions and features as a

result of some of the infrastructure enhancements we’re making.” Ibid; Am. Compl. ¶ 129.

Specifically, Abrahams stated that “product and platform investment that will help our growth in

the future resulted in comparatively fewer new product features for Slotomania and Bingo Blitz.”

Earnings Call Tr. 2; Am. Compl. ¶ 130. As to Slotomania, Abrahams explained that Playtika had

rewritten the “client from the ground up, moving Slotomania from C Sharp to Javascript. This

was the culmination of an 18-month project that will allow us to develop features more quickly

and efficiently and also give us access to a wider pool of R&D talent.” Earnings Call Tr. 2; Am.

Compl ¶ 132. As to Bingo Blitz, Abrahams disclosed that the game was undergoing a “total

revamping” and “complete brand face lift, including refreshing the lobby, map, logo, payment

page and many other aspects of the game.” Earnings Call Tr. 2; Am. Compl ¶ 155.

After these announcements, on the same day, Playtika’s share price dropped by more than

23%. Am. Compl. ¶¶ 16, 205.

III. The Infrastructure Changes to Slotomania and Bingo Blitz

Through speaking with confidential informants and at least one software expert, plaintiff

alleges it discovered that at or around the time of the IPO, Playtika had already begun

implementing the infrastructure changes to Slotomania and Bingo Blitz that Abrahams referenced

in his earnings call. Id. ¶ 127. These infrastructure changes, plaintiff contends, “would have a

material impact on [Playtika’s] ability to rollout features and content,” id. ¶ 139, and therefore

should have been, but were not, disclosed to prospective shareholders in the Registration

Statement.

Slotomania. Plaintiff alleges that at the time of the IPO, Playtika was “already undertaking

a demanding ‘18-month project’ of migrating Slotomania’s programming language from C-Sharp

to Javascript.” Am. Compl. ¶ 12. Plaintiff’s confidential informants—former employees of

Playtika, id. ¶ 45—stated that the migration would “take a long time,” be “very complicated,” and

“pose major risks.” Id. ¶ 140; see id. ¶¶ 141–43. More specifically, plaintiff asserts that Playtika

would have to expend its limited time and resources on the migration project, which “placed at

risk the ability to generate and deploy product features in the same way and frequency as prior to

the migration project.” Id. ¶ 150(f). In addition, according to plaintiff, because Playtika’s

engineers would need time to familiarize themselves with creating new features and content in the

new programming language, the rollout of content would slow. Id. ¶ 151. Finally, plaintiff alleges

the migration process poses inherent risks, such as the risk that the new product would not properly

integrate with third-party platforms. Id. ¶ 152.

Bingo Blitz. Plaintiff alleges that at the time of the IPO, Playtika was “already in the

‘design stage’ of executing a ‘total revamping’ and complete overhaul of Bingo Blitz’s User

Interface and corresponding ‘backend’ Bingo Blitz engine.” Id. ¶ 12. One confidential informant

explained that there was a “plan” at Playtika for the Bingo Blitz redesign to cause “the feature

deployment roadmap to decrease between ‘5% and 10%.’” Id. ¶ 169. As with the Slotomania

migration, plaintiff alleges that the Bingo Blitz redesign jeopardized Playtika’s ability to timely

develop and release new game features for several reasons. First, employees who otherwise would

be working on developing new content would instead be spending time overhauling the Bingo Blitz

interface. Id. ¶ 174. Second, the overhaul would require testing before a rollout, which could

result in delays in content release. Id. ¶ 175. Finally, major overhauls tend to cause users to leave

games. Id. ¶ 176.

Plaintiff alleges that the risks described above materialized in the Third Quarter of 2021.

Id. ¶¶ 153, 177.

IV. This Lawsuit

Idan Bar-Asher filed the original complaint in this case in November 2021. Compl. (Dkt.

#1). In March 2022, Judge Bulsara appointed LBMotion Ltd. as the lead plaintiff. See March 9,

2022 Order (Dkt. #32).

On May 6, 2022, LBMotion Ltd. filed an amended complaint bringing two causes of action

against defendants. See Am. Compl. First, plaintiff alleges that all defendants violated Section 11

of the Securities Act, 15 U.S.C. § 77k, because the Registration Statement was misleading,

contained untrue statements of material facts, omitted material facts necessary to make the

statements not misleading, and omitted material facts required to be stated therein. Id. ¶¶ 214–25.

Second, plaintiff alleges that the individual defendants violated Section 15 of the Securities Act,

15 U.S.C. § 77o, because they were each “control persons” of Playtika and participated in the

preparation and dissemination of the Registration Statement. Am. Compl. ¶¶ 226–31. Plaintiff

seeks compensatory damages and costs on behalf of itself and the other putative class members.

See id. at 76 (“Prayer for Relief”).

In alleging violations of Sections 11 and 15, plaintiff proceeds on a culpable-omissions

theory. Plaintiff alleges that defendants’ failure to disclose the specific infrastructure changes to

Slotomania and Bingo Blitz rendered twenty different statements in the Registration Statement

materially misleading. Id. ¶¶ 179, 184(a)–(t). Plaintiff does not allege that any one of these

statements standing alone is false or misleading. Rather, plaintiff alleges that these statements,

“when viewed collectively and in context, created the misleading impression that there were no

undisclosed material risks to Playtika’s ability to continue rolling out product features on a

‘constant cadence.’” Id. ¶ 185. Plaintiff specifically references the repeated use of phrases such

as “constant cadence” or “constant flow,” alleging that they carry “a meaning that there will be a

steady undisturbed frequency to the roll-out of product features will occur.” Id. ¶ 185(d).

Plaintiff also alleges that under Item 105 (formerly Item 503) of SEC Regulation S-K, 17

C.F.R. § 229.105, defendants had a duty to disclose the two infrastructure changes as “material

factors that make an investment in the registrant or offering speculative or risky.” Am. Compl.

¶ 187. Plaintiff further alleges that defendants were required by Item 105 to disclose “the

underlying conditions requiring or prompting Playtika to undergo these two infrastructure

changes,” including that its code was outdated and that its user base was too old. Id. ¶ 188. Lastly,

plaintiff alleges the risks that Playtika did disclose were misleading because those risks were

“inaccurately described as potential risks.” Id. ¶ 189; see id. ¶¶ 190–92.

Plaintiff seeks compensatory damages and costs on behalf of itself and the other putative

class members. See id. at 76 (“Prayer for Relief”).

Defendants have now moved to dismiss the complaint. See Defs.’ Mem.

LEGAL STANDARDS

In evaluating a motion to dismiss under Rule 12(b)(6), a court must “accept all factual

allegations as true, and draw all reasonable inferences in the plaintiff’s favor.” Austin v. Town of

Farmington, 826 F.3d 622, 625 (2d Cir. 2016) (citing Chambers v. Time Warner, Inc., 282 F.3d

147, 152 (2d Cir. 2002)). To avoid dismissal, the complaint’s “[f]actual allegations must be

enough to raise a right to relief above the speculative level . . . on the assumption that all of the

allegations in the complaint are true.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)

(citations omitted). The complaint, in other words, must plead “enough facts to state a claim to

relief that is plausible on its face.” Id. at 570. While the plausibility standard “is not akin to a

‘probability requirement,’” it requires “more than a sheer possibility that a defendant has acted

unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 556).

At the motion-to-dismiss stage, a court may consider only (i) the complaint itself, (ii)

documents either attached to the complaint or incorporated in it by reference, (iii) documents the

plaintiff relied on and knew of when bringing suit, and (iv) matters in the public record that are

subject to judicial notice. See, e.g., ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d

Cir. 2007); Sira v. Morton, 380 F.3d 57, 67 (2d Cir. 2004); Leonard F. v. Israel Disc. Bank of New

York, 199 F.3d 99, 107 (2d Cir. 1999).

DISCUSSION

Plaintiff’s Section 11 claim is dismissed. Because plaintiff cannot plead a Section 15 claim

without a primary offense, that claim is dismissed as well.

I. Plaintiff Fails to State a Section 11 Claim

Plaintiff has not adequately pleaded a claim under Section 11 of the Securities Act. Section

11 imposes liability for filing a registration statement that “contain[s] an untrue statement of a

material fact or omit[s] to state a material fact required to be stated therein or necessary to make

the statements therein not misleading.” In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347,

358–59 (2d Cir. 2010) (citing 15 U.S.C. § 77k(a)). To state a claim under Section 11, plaintiff

must plead facts sufficient to establish one of the three bases for liability—(1) a material

misrepresentation; (2) a material omission of information that is necessary to prevent existing

disclosures from being misleading; or (3) a material omission in contravention of an affirmative

legal disclosure obligation. See Hutchison v. Deutsche Bank Sec. Inc., 647 F.3d 479, 484 (2d Cir.

2011).

Here, while plaintiff asserts that the Registration Statement contained “untrue statements

of material fact,” Am. Compl. ¶ 217, plaintiff has not developed a theory of affirmative material

misrepresentation. Instead, plaintiff’s theory is that defendants violated Section 11 through an

omission—namely, through the Registration Statement’s failure to disclose that infrastructure

upgrades to Slotomania and Bingo Blitz were underway. See id. ¶¶ 184–92. As explained below,

plaintiff has failed to state a claim under this theory, because plaintiff has not plausibly alleged

that disclosure of that fact was necessary to prevent Playtika’s existing disclosures from being

misleading or to comply with an affirmative legal obligation.

A. Plaintiff Has Not Adequately Alleged a Material Omission of Information Needed

to Prevent Existing Disclosures From Being Misleading

Plaintiff has not adequately pleaded that disclosure of the infrastructure upgrades to

Slotomania and Bingo Blitz was necessary to prevent existing disclosures from being misleading.

“[A] corporation is not required to disclose a fact merely because a reasonable investor

would very much like to know that fact.” In re Time Warner Inc. Sec. Litig., 9 F.3d 259, 267 (2d

Cir. 1993). Rather, Section 11 imposes liability only under limited circumstances, including when

a registration statement “omit[s] to state a material fact . . . necessary to make the statements

therein not misleading.” Morgan Stanley, 592 F.3d at 358 (citing 15 U.S.C. § 77k(a)).

Plaintiff argues that disclosure of the infrastructure upgrades to Slotomania and Bingo Blitz

was necessary to prevent portions of the Registration Statement discussing a “constant cadence”

of feature releases from being misleading. Specifically, plaintiff alleges that based on statements

about “a constant cadence of novel content and feature creation,” “a constant flow of new content,”

a “focus[] on continuing to implement and enhance features that keep games fresh,” “a steady

release of new features,” and “consistently introduc[ing] updates and enhances,” Am. Compl.

¶ 184, a reasonable investor would have concluded that “no material undisclosed risks to Playtika’s

ability to maintain this ‘constant cadence’” existed, Pl.’s Opp’n 7 (Dkt. #62). Since the

infrastructure upgrades to Slotomania and Bingo Blitz “in fact pose[d] a risk to the cadence of

feature release,” id. at 19, plaintiff argues, Playtika was obligated to disclose that risk.

Plaintiff’s theory fails to state a plausible claim because Playtika expressly disclosed that

whether it could maintain a constant cadence of feature deployment was uncertain, because of

causes including but not limited to “systems integration or migration work” and potential failures

“in implementing new systems and transitioning data.” Form S-1 at 41. No Section 11 liability

lies where a registration statement “adequately warned the reasonable investor of the allegedly

omitted risks.” In re ProShares Tr. Sec. Litig., 728 F.3d 96, 102 (2d Cir. 2013); see DeMaria v.

Andersen, 153 F. Supp. 2d 300, 311 (S.D.N.Y. 2001) (“[C]ourts in this Circuit consistently have

dismissed claims under Section 11 if they charge omission of what was in fact disclosed.”

(quotation marks and citation omitted)), aff’d, 318 F.3d 170 (2d Cir. 2003). And “where there is

disclosure that is broad enough to cover a specific risk, the disclosure is not misleading simply

because it fails to discuss the specific risk.” In re Bank of Am. AIG Disclosure Sec. Litig., 980 F.

Supp. 2d 564, 579 (S.D.N.Y. 2013), aff’d, 566 F. App’x 93 (2d Cir. 2014) (citing Hunt v. Alliance

N. Am. Gov’t Income Trust, Inc., 159 F.3d 723, 730–31 (2d Cir.1998)).

Here, Playtika disclosed that Playtika’s “ability to anticipate or respond to changing

technology and evolving standards and to develop and introduce improvements and enhancements

to games on a timely basis is a significant factor affecting [its] ability to remain competitive.”

Form S-1 at 38. Playtika then expressly warned that “[it] cannot assure [investors] that [it] will

achieve the necessary technological advances or have the financial or other resources needed to

introduce new games or improvements and enhancements to games on a timely basis or at all.”

Ibid. (emphasis added). Playtika specifically identified “implementing new systems and

transitioning data,” “difficulties in developing new systems,” and “maintaining and upgrading

current systems,” as potential causes of disruption. Id. at 40–41. These disclosures, taken together,

plainly conveyed that there were risks to Playtika’s constant deployment of new features, including

risks associated with developing, upgrading, and transitioning systems. True, these disclosures

were not at a such a fine level of granularity as to mention Slotomania or Bingo Blitz specifically.

But because Playtika’s disclosure was “broad enough to cover” the risk associated with those

specific upgrades, “the disclosure is not misleading simply because it fails to discuss the specific

risk.” Bank of Am. AIG Disclosure, 980 F. Supp. 2d at 579.

Plaintiff contends that Playtika needed to disclose the fact that the Slotomania and Bingo

Blitz infrastructure projects were already underway to prevent the impression that infrastructure

changes that might lead to disruption were merely “hypothetical,” as opposed to ongoing. Pl.

Opp’n 14. But the Registration Statement made clear that changes that could lead to disruption

were “constantly” occurring. See Form S-1 at 18. Specifically, Playtika disclosed that “[its]

industry is constantly changing games and business models in order to adopt and optimize new

technologies.” Ibid. It further stated that its “success depends upon [the company’s] ability to

adapt to, and keep pace with, changes in technology, platforms and devices, and evolving industry

standards . . . this includes continuing to improve [its] technology . . . and adapt to the release of

new devices and platforms . . . which can be costly and generate risk.” Id. at 38. And, in describing

how to keep games such as Slotomania and Bingo Blitz popular with players, Playtika stated that

it “must constantly enhance and upgrade [a] game with new features.” Id. at 15. Since Playtika

disclosed that it was constantly engaged in the type of upgrade that could lead to disruptions and

interruptions, there was nothing misleading about Playtika’s not disclosing the specific projects

that it had underway.

Finally, plaintiff falls short in arguing that these disclosures of “potential risks” were

misleading because they concerned risks that had already materialized. See Am. Compl. ¶ 189–

92. “Courts in this Circuit have held that a company’s purported risk disclosures are misleading

where the company warns only that a risk may impact its business when that risk has already

materialized.” In re Facebook, Inc. IPO Sec. & Derivative Litig., 986 F. Supp. 2d 487, 516

(S.D.N.Y. 2013). But plaintiff has not sufficiently pleaded that the risks associated with

infrastructure overhauls to Slotomania and Bingo Blitz had already materialized when Playtika

made the challenged statements.

Citing confidential witnesses and a software expert, plaintiff asserts in general terms that

certain risks inhere in these types of infrastructure projects. As to Slotomania, plaintiff alleges

that the migration was “very complex,” Am. Compl. ¶ 141, and posed risks of (i) diverting

Playtika’s finite time and resources to the endeavor, id. ¶ 150; (ii) delaying rollouts because

Playtika’s developers needed to “learn or orient to this new language,” id. ¶ 151; and (iii) failing

to properly integrate with third-party platforms and account for fixes and features from the

previous software, id. ¶ 152. But, except for summarily asserting that Slotomania’s reduced

feature deployment “was naturally a consequence” of the migration project, nowhere does plaintiff

explain whether or how these hypothetical risks had actually materialized at the time of the IPO.

Id. ¶ 153.

Similarly, plaintiff alleges in the abstract that the Bingo Blitz redesign placed at risk

Playtika’s ability to consistently release new features because (i) Playtika must devote its limited

resources to the redesign, id. ¶ 174; (ii) the overhaul would require certain pre-rollout tests, which

might result in delays, id. ¶ 175; and (iii) major overhauls tend to cause users to leave games, id.

¶ 176. Yet again, plaintiff does not allege that any of these risks actually came to pass at the time

of the IPO. While plaintiff’s confidential witness explained that Playtika had a “plan” for the

Bingo Blitz redesign to cause “the feature deployment roadmap to decrease between ‘5% and

10%,’” id. ¶ 169, the amended complaint does not allege that this plan existed at the time of the

IPO; that the plan had been implemented at the time of the IPO; or that the plan was a result of the

materialization of the above-mentioned risks. In any case, such a “generic allegation[]” by a

confidential witness, without other factual support, “fail[s] to raise a plausible inference that the

Registration Statement omitted a fact, much less a material fact, that required disclosure.” In re

Coty Inc. Sec. Litig., No. 14-CV-919 (RJS), 2016 WL 1271065, at *6 (S.D.N.Y. Mar. 29, 2016)

(finding confidential informant’s allegations that sales were “forecasted to be down,” and “smaller

than expected” at the time of the IPO were insufficient to sustain a Section 11 claim).

In sum, because Playtika “warn[ed] investors of exactly the risk that plaintiff[] claim[s]

was not disclosed,” Olkey v. Hyperion 1999 Term Tr., Inc., 98 F.3d 2, 3 (2d Cir. 1996), plaintiff

fails to state a claim on the theory that disclosure of the Slotomania and Bingo Blitz upgrades was

needed to prevent existing disclosures from being misleading.

B. Playtika Did Not Have a Legal Obligation to Disclose the Infrastructure Projects

Plaintiff has also failed to plausibly allege that Playtika had a legal duty to disclose the

infrastructure changes to Slotomania and Bingo Blitz. “[A] duty [to disclose] may arise when there

is . . . ‘a statute or regulation requiring disclosure.’” Stratte-McClure v. Morgan Stanley, 776 F.3d

94, 101 (2d Cir. 2015) (quoting Glazer v. Formica Corp., 964 F.2d 149, 157 (2d Cir. 1992)). As

relevant here, Item 105 of SEC Regulation S-K requires that a registration statement include “a

discussion of the most significant factors that make the offering speculative or risky.” Panther

Partners Inc. v. Jianpu Tech. Inc., No. 18-CV-9848 (PGG), 2020 WL 5757628, at *10 (S.D.N.Y.

Sept. 27, 2020); see 17 C.F.R. § 229.105; see also Garnett v. RLX Tech. Inc., 632 F. Supp. 3d 574,

598 (S.D.N.Y. 2022), aff’d sub nom. Tseng v. De Vries, 2023 WL 8073087 (2d Cir. Nov. 21, 2023).

Playtika was not required to disclose the two infrastructure changes under Item 105 of SEC

Regulation S-K. As described above, Playtika disclosed that (i) the measures it takes to “adapt to,

and keep pace with, changes in technology” “can be costly and generate risk,” Form S-1 at 38; (ii)

it might not be able “to introduce new games or improvements and enhancements to games on a

timely basis or at all,” ibid; (iii) it would engage in “systems integration or migration work” that

could result in “interruptions, delays or cessations of service,” id. at 41; (iv) it “could encounter

difficulties in developing new systems, maintaining and upgrading current systems,” id. at 40; and

(v) it “may not be successful in implementing new systems and transitioning data, which could

cause business disruptions,” id. at 41. See pp. 10–14, supra. Those disclosures put shareholders

on notice that Playtika would engage in systems migration and upgrades that could disrupt the

flow of new content—in other words, infrastructure changes like the ones the company

implemented for Slotomania and Bingo Blitz. Item 105 did not require defendants to disclose those

risks at a more granular level because, as explained above, these disclosures were “broad enough

to cover [those] specific risk[s].” In re Bank of Am. AIG Disclosure, 980 F. Supp. 2d at 579.

Further, Playtika was not required under Item 105 to disclose “the underlying conditions

requiring or prompting Playtika to undergo these two infrastructure changes,” including that its

code was outdated and that its user base was too old, Am. Compl. ¶ 188. In detailing its business

risks, Playtika disclosed that its industry “is characterized by rapid technological development”

and “is constantly changing games and business models in order to adopt and optimize new

technologies.” Form S-1 at 18. Playtika also disclosed that in order to attract and retain players

for its most popular games, Playtika “must constantly enhance . . . and upgrade [its games] with

new features . . . and content that players find attractive. As a result, each of [its] games requires

significant product development, marketing and other resources to develop, launch and sustain

popularity through regular upgrades.” Ibid. Those disclosures informed investors that Playtika

needed to constantly develop and upgrade its games both in order to prevent them from becoming

outdated and to attract new and retain existing players.

Plaintiff therefore has not stated a Section 11 claim based on the theory that Playtika had a

duty under Item 105 to disclose the specific infrastructure changes.

II. Plaintiff Fails to State a Section 15 Claim

Plaintiff’s Section 15 claims must also be dismissed. Section 15 imposes joint and several

vicarious liability for violations of Section 11 on any person who “controls” the primary violator.

See 15 U.S.C. § 77o. “The fate of the plaintiffs’ Section 15 claim is wholly dependent on [the]

disposition of their § 11 . . . claim[].” Iowa Pub. Employees’ Ret. Sys. v. MF Glob., Ltd., 620 F.3d

137, 140, n.3 (2d Cir. 2010). Because plaintiff fails to adequately plead a Section 11 violation, its

Section 15 claim is also dismissed.

CONCLUSION

For the foregoing reasons, defendants’ motion to dismiss is granted and plaintiff’s claims

are dismissed with prejudice. Plaintiff has neither indicated any intention to seek leave to amend

its complaint a second time nor illustrated that it possesses additional facts that may cure its

pleading deficiencies. Accordingly, dismissal without leave to amend is appropriate. See Shields

v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1132 (2d Cir. 1994).

The Clerk of Court is directed to enter judgment and close the case.

SO ORDERED.

/s/ Rachel Kovner

RACHEL P. KOVNER

United States District Judge

Dated: March 18, 2024

Brooklyn, New York