Petition for Writ of Certiorari — ON24, Inc., et al., Petitioners v. Leadersel Innotech ESG

Supreme Court briefJun 8, 2026

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No. _____

In the Supreme Court of the United States

ON24, INC., ET AL., PETITIONERS

LEADERSEL INNOTECH ESG

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

DAVID J. WIENER

ANNA ERICKSON WHITE

MORRISON & FOERSTER LLP

425 Market Street

San Francisco, CA 94105

BRIAN R. MATSUI

Counsel of Record

MORRISON & FOERSTER LLP

2100 L Street NW, Suite 900

Washington, DC 20037

(202) 887-8784

BMatsui@mofo.com

ALEXANDRA M. AVVOCATO

MORRISON & FOERSTER LLP

250 West 55th Street

LAUREN PARDEE RUBEN

New York, NY 10019

MORRISON & FOERSTER LLP

370 17th Street

Denver, CO 80202

Counsel for ON24, Inc.

(additional counsel listed on inside cover)

JUNE 2026

THOMAS M. PETERSON

CHARLENE S. SHIMADA

KEVIN M. PAPAY

MORGAN, LEWIS & BOCKIUS LLP

600 Montgomery Street

Suite 2300

San Francisco, CA 94111

(415) 442-1000

thomas.peterson@morganlewis.com

Counsel for Goldman Sachs & Co. LLC; J.P. Morgan

Securities LLC; KeyBanc Capital Markets Inc.; Robert W.

Baird & Co. Incorporated; Canaccord Genuity LLC;

Needham & Company, LLC; Piper Sandler & Co.; and

William Blair & Company L.L.C.

QUESTIONS PRESENTED

Section 11(a) of the Securities Act of 1933 imposes liability when a registration statement

“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.” 15 U.S.C. § 77k(a). This petition

presents three important and recurring legal questions regarding the “omissions” clause of the statute:

1. Whether an issuer violates Section 11(a)’s

misleading-omissions prong by describing unmaterialized risks as hypothetical.

2. Whether an issuer violates Section 11(a)’s

misleading-omissions prong whenever it omits information related to a disclosed fact regardless of

whether the omission renders an affirmative statement misleading.

3. Whether an issuer violates Item 303 of Regulation S-K—and thus the prong of Section 11(a)

prohibiting the omission of required statements—by

failing to disclose immaterial facts as “known trends

or uncertainties” that are reasonably likely to have

a material impact on financial results.

PARTIES TO THE PROCEEDINGS

Petitioners (Defendants-Appellees) are ON24,

Inc.; Sharat Sharan; Steven Vattuone; Denise

Persson; Holger Staude; Dominique Trempont;

Barry Zwarenstein; Irwin Federman; Goldman

Sachs & Co. LLC; J.P. Morgan Securities LLC; KeyBanc Capital Markets Inc.; Robert W. Baird & Co.

Incorporated; Canaccord Genuity LLC; Needham

& Company, LLC; Piper Sandler & Co.; and William

Blair & Company L.L.C.

Respondent (Plaintiff-Appellant) is Leadersel

Innotech ESG.

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6 of the Rules of the Supreme Court, undersigned counsel for petitioners

certify the corporate disclosure statements set forth

in the appendix. See Pet. App. 77a–79a.

STATEMENT OF RELATED PROCEEDINGS

United States District Court (N.D. Cal.):

In re ON24, Inc. Securities Litigation,

No. 4:21-cv-08578-YGR (Mar. 5, 2024)

United States Court of Appeals (9th Cir.):

In re ON24, Inc. Securities Litigation,

No. 24-2204 (Jan. 7, 2026)

iii

TABLE OF CONTENTS

QUESTIONS PRESENTED ..................................... i

PARTIES TO THE PROCEEDINGS ...................... ii

CORPORATE DISCLOSURE STATEMENT ......... ii

STATEMENT OF RELATED PROCEEDINGS ..... ii

TABLE OF AUTHORITIES ................................... vi

PETITION FOR WRIT OF CERTIORARI .............. 1

OPINIONS BELOW................................................. 3

JURISDICTION ....................................................... 3

STATUTORY PROVISIONS ................................... 3

STATEMENT OF THE CASE ................................. 4

Legal Background .................................... 4

Factual Background ................................. 6

Procedural Background ........................... 9

REASONS FOR GRANTING REVIEW ................ 14

THE COURT SHOULD AGAIN GRANT

REVIEW TO RESOLVE A CIRCUIT

SPLIT ON WHAT RISK DISCLOSURES

REQUIRE ....................................................... 14

The First, Third, and Tenth Circuits

hold that risk disclosures are not

misleading when they describe as

hypothetical risks that have not yet

occurred and are not certain to occur .... 15

II.

The Ninth Circuit holds that risks

have materialized even when they

have not yet occurred, and that

disclosures describing those risks as

hypothetical are thus misleading .......... 17

THE NINTH CIRCUIT’S LIMITLESS

DISCLOSURE RULE VIOLATES TEXT

AND PRECEDENT........................................ 22

Absent a legal duty to disclose, an

omission is actionable only if it is

material and misleading ........................ 22

The Ninth Circuit’s decision conflicts

with the statutory text and

overwhelming precedent ........................ 24

III. THE NINTH CIRCUIT’S EXPANSION OF

THE DISCLOSURE OBLIGATION

UNDER ITEM 303 WARRANTS REVIEW .. 26

IV. THE QUESTIONS PRESENTED ARE

RECURRING AND EXCEPTIONALLY

IMPORTANT ................................................. 29

CONCLUSION ....................................................... 30

APPENDIX A

Memorandum Disposition of the

United States Court of Appeals

for the Ninth Circuit

(January 7, 2026) ........................ 1a

APPENDIX B

Order of the United States

District Court for the Northern

District of California Granting

Motion to Dismiss With Prejudice

and Motion for Joinder

(March 5, 2024)............................ 9a

APPENDIX C

Order of the United States

District Court for the Northern

District of California Granting

Motion to Dismiss and Motion

for Joinder

(July 7, 2023) ............................. 35a

APPENDIX D Order of the United States

Court of Appeals for the Ninth

Circuit Denying Petition for

Panel Rehearing or Rehearing

En Banc

(March 9, 2026).......................... 76a

APPENDIX E

Corporate Disclosure

Statement .................................. 77a

APPENDIX F

15 U.S.C. § 77k(a)...................... 80a

APPENDIX G 17 C.F.R. § 229.303 ................... 82a

TABLE OF AUTHORITIES

Cases

In re Adams Golf, Inc. Sec. Litig.,

381 F.3d 267 (3rd Cir. 2004) ............................ 24

In re Alphabet, Inc. Sec. Litig.,

1 F.4th 687 (9th Cir. 2021) ....................12, 17, 19

In re Facebook, Inc. Sec. Litig.,

87 F.4th 934 (9th Cir. 2023) ..................19, 20, 21

Facebook, Inc. v. Amalgamated Bank,

144 S. Ct. 2629 (2024).................. 2, 14, 19, 21, 30

Facebook, Inc. v. Amalgamated Bank,

604 U.S. 4 (2024)................................................. 2

Glassman v. Computervision Corp.,

90 F.3d 617 (1st Cir. 1996) ............................... 28

Ind. Pub. Ret. Sys. v. Pluralsight, Inc.,

45 F.4th 1236 (10th Cir. 2022) ....................16, 17

Kapps v. Torch Offshore, Inc.,

379 F.3d 207 (5th Cir. 2004) .................24, 27, 28

Karth v. Keryx Biopharmaceuticals, Inc.,

6 F.4th 123 (1st Cir. 2021) ..........................15, 16

Macquarie Infrastructure Corp. v.

Moab Partners, L.P.,

601 U.S. 257 (2024)..................................3, 22, 23

Nguyen v. MaxPoint Interactive, Inc.,

234 F. Supp. 3d 540 (S.D.N.Y. 2017) ............... 28

Oxford Asset Mgmt., Ltd. v. Jaharis,

297 F.3d 1182 (11th Cir. 2002)..............24, 27, 28

vii

Robinhood Markets, Inc. v. Sodha,

No. 25-944 (U.S. Feb. 5, 2026)............2, 3, 11, 22,

.................................................... 24, 25, 26, 29, 30

Rubke v. Capitol Bancorp Ltd,

551 F.3d 1156 (9th Cir. 2009)............................. 6

Slack Techs., LLC v. Pirani,

598 U.S. 759 (2023)............................................. 4

Sodha v. Golubowski,

154 F.4th 1019 (9th Cir. 2025) ..........5, 11, 15, 24

Steckman v. Hart Brewing, Inc.,

143 F.3d 1293 (9th Cir. 1998)........................... 27

TSC Indus., Inc. v. Northway, Inc.,

426 U.S. 438 (1976)....................................... 6, 30

Williams v. Globus Med., Inc.,

869 F.3d 235 (3d Cir. 2017) .............................. 16

Statutes

15 U.S.C.

§ 77k ..................... 3, 4, 5, 9, 15, 22, 23, 24, 25, 26

§ 77o .................................................................... 9

§ 78j(b) ........................................................4, 5, 19

28 U.S.C. § 1254(1)................................................... 3

Regulations

17 C.F.R.

§ 229.303 ....................................................3, 6, 26

§ 240.10b–5 ........................................5, 15, 19, 23

viii

Enhancement of Emerging Growth

Company Accommodations and

Simplification of Filer Status for

Reporting Companies,

91 Fed. Reg. 30086

(proposed May 21, 2026) ................................... 30

Management’s Discussion and

Analysis of Financial Condition

and Results of Operations,

54 Fed. Reg. 22427 (May 24, 1989) .................. 27

Semiannual Reporting,

91 Fed. Reg. 24968

(proposed May 7, 2026) ..................................... 30

PETITION FOR WRIT OF CERTIORARI

This petition raises an important, overarching,

and recurring issue: do the securities laws require

companies to predict the future in their risk disclosures or face liability? The Ninth Circuit’s answer—

alone among the circuits—is yes.

In February 2021, during the height of the

COVID-19 pandemic—before stay-at-home restrictions were lifted and vaccines were widely

available—ON24 held its initial public offering (IPO).

A digital experience platform that enables virtual

meetings and events, ON24 saw significant growth

and new customers during the pandemic when employees were required to work from home. ON24

prominently disclosed to investors that its “recent

revenue growth has been significantly impacted by an

increasing demand for [its] platform and products following the onset of the COVID-19 pandemic and

resulting precautionary measures.” And ON24’s risk

disclosures to investors expressly warned that “[a]s

the impact of COVID-19 lessens, there may be reduced demand for our platform, and our revenue

growth rate may decline.” Those risk disclosures even

more specifically explained, “[i]f fewer new enrollments or renewals occur as the impact of COVID-19

lessens, our cash and deferred revenue as of future

dates may decrease.”

The Ninth Circuit nonetheless held that these

disclosures were misleading for not saying more. In

the court’s view, ON24 had to disclose that a possibly

single-digit number of customers (out of almost 2000)

had declined to renew before the IPO and that other

customers had suggested they might not renew in the

future because their subscriptions were a COVID-related expense. The Ninth Circuit reached this

conclusion even though plaintiff had conceded that

those pre-IPO non-renewals had not affected ON24’s

business and that the potential harm that ON24 had

warned of in its risk disclosures—actual widespread

non-renewals if the effects of COVID-19 lessened—

had not yet occurred. In other words, based on what

ON24 knew at that time, ON24 had to predict that

the pandemic and related restrictions would end

shortly after February 2021 and that a material number of its customers would cancel their contracts when

they came up for renewal.

The Ninth Circuit’s holding squarely conflicts

with the First, Third, and Tenth Circuits, which hold

that risk disclosures are not misleading when they describe potential harms as hypothetical unless the

warned-of harm has already occurred or is virtually

certain to occur. Just two years ago, this Court recognized the importance of this conflict when it granted

certiorari in Facebook, Inc. v. Amalgamated Bank,

144 S. Ct. 2629 (2024). Though the Facebook petition

was ultimately dismissed as improvidently granted,

604 U.S. 4 (2024), the split persists—and here, unlike

in Facebook, no factual complications impede the

Court’s review.

What’s more, the decision below warrants review

for another reason: it squarely raises the two questions presented in Robinhood Markets, Inc. v. Sodha,

No. 25-944 (U.S. Feb. 5, 2026), a pending petition in

which the Court has called for the views of the Solicitor General. First, the Ninth Circuit’s ruling requires

disclosure of all information related to a disclosed

fact—including immaterial information—regardless

of whether any omission renders an affirmative statement misleading. That rule contravenes the text of

the securities laws, this Court’s decision in Macquarie

Infrastructure Corp. v. Moab Partners, L.P., 601 U.S.

257 (2024), and the holdings of other circuits. And

second, the Ninth Circuit held that immaterial, isolated incidents must be disclosed under Item 303 of

Regulation S-K as “known trends or uncertainties”—

a position equally at odds with the regulation’s text

and other circuits’ decisions. The Court should grant

certiorari or at least hold this petition pending its decision in Robinhood.

OPINIONS BELOW

The Ninth Circuit’s decision (Pet. App. 1a–8a) is

not reported but is available at 2026 WL 45259. The

Northern District of California’s order (Pet. App. 9a–

34a) is not reported but is available at 2024 WL

979951. The Ninth Circuit’s order denying panel rehearing and rehearing en banc (Pet. App. 76a) is

unreported.

JURISDICTION

The Court of Appeals entered its judgment on

January 7, 2026. Petitioners’ petition for panel rehearing and rehearing en banc was denied on March

9, 2026. This Court has jurisdiction under 28 U.S.C.

§ 1254(1).

STATUTORY PROVISIONS

The relevant provisions of 15 U.S.C. § 77k (Section 11 of the Securities Act of 1933), and 17 C.F.R.

§ 229.303 (Item 303 of Regulation S-K), are reproduced in the appendix at Pet. App. 80a–93a.

STATEMENT OF THE CASE

Legal Background

1. The Securities Act of 1933, 15 U.S.C. § 77a et

seq., and the Securities Exchange Act of 1934, 15

U.S.C. § 78a et seq., together “form the backbone of

American securities law.” Slack Techs., LLC v. Pirani, 598 U.S. 759, 762 (2023).

The 1933 Act is “focused primarily on the regulation of new offerings.” Ibid. (internal quotation

marks omitted). It requires a company intending to

publicly offer securities to register them with the SEC

and to “prepare a registration statement that includes

detailed information about the firm’s business and financial health so prospective buyers may fairly assess

whether to invest.” Ibid. “The law imposes strict liability on issuing companies when their registration

statements contain material misstatements or misleading omissions.” Ibid. (citing 15 U.S.C. § 77k).

The 1934 Act “sweeps more broadly.” Id. at 763.

“Among other things, it requires publicly traded companies to provide ongoing disclosures and regulates

trading on secondary markets.” Ibid. The law’s “main

liability provision sweeps more broadly too,” allowing

“suits in connection with the purchase or sale of ‘any

security,’ whether registered or not.” Ibid. (quoting

15 U.S.C. § 78j(b)). “But to prevail under this provision, a plaintiff must prove that any material

misleading statement or omission was made with scienter, i.e., with intent to deceive, manipulate, or

defraud.” Ibid. (internal quotation marks omitted).

Notwithstanding these differences, both statutes

make material misrepresentations and misleading

omissions unlawful. Section 11(a) of the 1933 Act, for

its part, creates a private right of action for any purchaser of a security if “any part of the registration

statement, when such part became effective, contained an untrue statement of a material fact or

omitted to state a material fact required to be stated

therein or necessary to make the statements therein

not misleading.” 15 U.S.C. § 77k(a).

Section 10(b) of the 1934 Act, meanwhile, makes

it unlawful to employ, in connection with the purchase or sale of any security, “any manipulative or

deceptive device or contrivance in contravention of

such rules and regulations as the [SEC] may prescribe.” 15 U.S.C. § 78j(b). Under that provision, the

SEC has promulgated Rule 10b–5, which makes it unlawful, in connection with the purchase or sale of any

security, “[t]o make any untrue statement of a material fact or to omit to state a material fact necessary

in order to make the statements made, in light of the

circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b–5.

Accordingly, both Section 11(a) of the 1933 Act

and Rule 10b–5 impose liability for the omission of

material information that is necessary to prevent affirmative statements from misleading investors.

Courts applying these parallel provisions have interpreted them consistently.

See, e.g., Sodha v.

Golubowski, 154 F.4th 1019, 1033 n.3 (9th Cir. 2025).

2. Section 11(a) also imposes affirmative disclosure obligations. Item 303 of Regulation S-K sets

forth one such requirement. It requires issuers to disclose “any known trends or uncertainties that have

had or that are reasonably likely to have a material

favorable or unfavorable impact on net sales or revenues or income from continuing operations.” 17

C.F.R. § 229.303(b)(2)(ii). But these affirmative disclosure requirements also strike a balance:

overdisclosure can “bury the shareholders in an avalanche of trivial information,” a state of affairs “that

is hardly conducive to informed decisionmaking.”

TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 448–

449 (1976). The securities laws accordingly “do[] not

require the disclosure of all information a potential

investor might take into account when making his decision.” Rubke v. Capitol Bancorp Ltd, 551 F.3d 1156,

1163 (9th Cir. 2009).

Factual Background

1. During the relevant period, ON24 offered a

cloud-based digital experience platform that helped

businesses transition from traditional marketing to

scalable, digital-based approaches.

ER-23 (¶3);

1-SER-46–47.1 ON24’s customers used the platform

to host interactive webinars and virtual events.

1-SER-46. ON24 generated revenue through selling

subscriptions, almost all of which were annual contracts billed in advance. ER-35 (¶¶63–64).

In 2019, ON24’s revenue grew at a robust rate of

about 8%. See 1-SER-57. And that rate of growth accelerated in 2020 as the COVID-19 pandemic began

and many businesses turned to ON24 as a remote solution to their marketing needs. ER-23 (¶7). During

the first three quarters of 2020, ON24’s revenue

1 Citations to “ER” and “SER” are to the Excerpts

of Record filed in the Court of Appeals. Citations to

“C.A. Dkt.” are to the docket in the Court of Appeals.

increased 59% as compared to the prior year. ER-23

(¶7). While plaintiff later alleged that this growth

came from “atypical” customers—i.e., smaller businesses that signed one-year subscriptions with no

intent to renew and a handful of businesses that

signed six-month contracts—the documents plaintiff

cites show that ON24’s 2020 growth came from both

new and existing customers, including an increasing

number of large companies. See C.A. Dkt. 29 at 5–6,

34.

ON24 recognized that the COVID-19 pandemic

created uncertainty as to whether new customers

would renew their subscriptions. Id. at 6. Like many

sales-based companies, ON24 employees sought to

mitigate those risks by identifying accounts at risk of

non-renewal (or “churn”) and discussing potential

ways to retain customers. Ibid.

2. ON24 conducted its IPO on February 3, 2021,

Pet. App. 10a, when the pandemic remained at its

height with remote work, closed schools, and limited

vaccines. ON24 prominently disclosed to investors

the role the pandemic had played in its recent success,

explaining that its “recent revenue growth has been

significantly impacted by an increasing demand for

[its] platform and products following the onset of the

COVID-19 pandemic and resulting precautionary

measures.” ER-63 (¶181).

ON24 then provided extensive risk disclosures

that included the following warnings:

•

“As the impact of COVID-19 lessens, there

may be reduced demand for our platform,

and our revenue growth rate may decline.

If these new customers elect not to continue

their subscription as the impact of COVID19 lessens, our business, financial condition

and results of operations would be harmed.”

ER-63 (¶181).

•

“[O]ur revenue and revenue growth rate

may decline in future periods compared to

2020 as the impact of COVID-19 lessens.

. . . If fewer new enrollments or renewals

occur as the impact of COVID-19 lessens,

our cash and deferred revenue as of future

dates may decrease.” ER-63–64 (¶182).

•

“Failure to attract new customers or retain,

expand the usage of, and upsell our products to existing customers would harm our

business and growth prospects. . . . Renewals of subscriptions may decline or fluctuate

because of several factors, such as dissatisfaction with our solutions or support, a

customer no longer having a need for our solutions or the perception that competitive

products provide better or less expensive

options.” ER-64 (¶183).

Alongside those disclosures, ON24 optimistically

described its customer base as “highly engaged and

loyal.” ER-57 (¶175). It also provided prior revenue

statistics and explained that its revenue growth “reflects our success in acquiring new customers and

expanding subscriptions with existing customers,

which was occurring prior to the COVID-19 pandemic

and has accelerated in 2020 partly in response to the

COVID-19 pandemic.” ER-59 (¶177).2

3. ON24’s growth continued after the IPO. See

C.A. Dkt. 29 at 8. By the end of 2021, ON24’s yearover-year revenue had increased by 30%, and its subscription revenue specifically increased by 43%.

2-SER-384. Yet ON24’s 2021 growth just missed the

even higher expectations that analysts had set—expectations that were not provided anywhere in

ON24’s offering documents—and ON24’s stock price

fell. ER-29 (¶¶26–27).

Procedural Background

1. Lead plaintiff Leadersel Innotech ESG

brought this putative class action against ON24, its

executives, and the underwriters of its IPO under Section 11 of the Securities Act of 1933 and regulations

issued thereunder. ER-66, ER-80–83.3 Plaintiff alleged that at the onset of the pandemic in March 2020,

ON24 began receiving an influx of “atypical” customers, most of whom obtained one-year contracts, with

a few obtaining six-month contracts. ER-24 (¶9), ER2 In 2020, ON24’s revenue from existing custom-

ers increased, as did the percentage of customers with

multi-year contracts and customers contributing at

least $100,000 in annual recurring revenue, which

were generally large organizations. ER-23–24 (¶7),

ER-37 (¶¶71–72); 1-SER-47, 1-SER-59, 1-SER-69,

1-SER-106, 1-SER-108–109, 1-SER-111–112.

3 Plaintiff also alleged a control person liability

claim against each of the individual defendants under

Section 15 of the Securities Act, 15 U.S.C. § 77o. ER83–84.

53 (¶160). As relevant here, plaintiff alleged that at

the time of the February 2021 IPO, ON24 knew that

(1) a small handful of the six-month contracts had not

renewed and (2) an unspecified number of new customers had expressed a future intent not to renew

their subscriptions because those subscriptions were

a COVID-related expense. See Pet. App. 26a–27a;

ER-24 (¶10), ER-53 (¶161), ER-59–61 (¶178). Plaintiff also asserted that significant non-renewal had

started before the IPO—but plaintiff ’s accounts of

that were vague, internally contradictory, and at odds

with plaintiff ’s theory that atypical contracts started

in March 2020, meaning they would not have been up

for renewal at the time of the IPO. Pet. App. 26a–30a.

In plaintiff ’s view, this meant that ON24 knew

for a fact that material non-renewal would occur after

the IPO, and ON24 therefore acted misleadingly by

describing future material non-renewal as a risk rather than a certainty. ER-24 (¶10), ER-59–61 (¶178).

On that theory, plaintiff challenged five statements

as misleading: (1) ON24’s description of its customer

base as “highly engaged and loyal”; (2) ON24’s recounting of past “acceleration in revenue growth rate

due to the COVID-19 pandemic”; (3) ON24’s warning

of “a potential reduction in product demand post-pandemic”; (4) ON24’s warning of “a potential decline in

the revenue growth rate post-pandemic”; and (5)

ON24’s warning of “the possibility that subscription

renewals and upselling may decline in the future.”

Pet. App. 5a.4

4 Plaintiff challenged additional statements that

are no longer at issue. See Pet. App. 40a–51a.

2. The district court dismissed the complaint. It

concluded that the heart of plaintiff ’s case was that

ON24 faced material customer non-renewals before

the IPO. But plaintiff ’s allegations at most “reflect[ed] a ‘risk’ of churn” (i.e., customer non-renewal)

because, under plaintiff ’s own theory of the case, “the

atypical, COVID-driven customer influx did not start

until March 2020.” Pet. App. 27a. And “[a]side from

the ‘handful’ of customers who signed six-month contracts, the great majority of these atypical customers

then would not have come up for renewal until after

the February 2021 IPO.” Pet. App. 27a. The district

court also concluded that plaintiff ’s allegations of preIPO non-renewal were fatally vague and internally

inconsistent. Pet. App. 23a–29a.

In any event, the district court ruled that ON24’s

“detailed disclosures warn[e]d of the very risks that

plaintiff claim[ed] ON24 failed to disclose.” Pet. App.

31a. They “adequately disclosed that, as COVID

cooled, their customer acquisition and rate of growth

might cool as well.” Pet. App. 32a. Nothing more was

needed to adequately warn of future contingent

events.

3. Plaintiff appealed to the Ninth Circuit. After

briefing and oral argument, the Ninth Circuit vacated

submission pending its ruling in Robinhood (Sodha,

154 F.4th 1019).5 See C.A. Dkt. 50.

5 The case caption was “Sodha v. Golubowski” in

the Ninth Circuit, see 154 F.4th 1019, and is “Robinhood Markets, Inc. v. Sodha” in this Court, see No. 25944.

After the Ninth Circuit ruled in Robinhood, the

Court of Appeals ordered supplemental briefing. See

C.A. Dkt. 55. Following that supplemental briefing

on the Robinhood decision’s effect on this matter, the

Ninth Circuit reversed in relevant part, holding that

the five statements at issue were misleading. See Pet.

App. 5a–7a.6 Citing its prior precedent, the Court of

Appeals explained that “ ‘[r]isk disclosures that speak

entirely of as-yet-unrealized risks and contingencies

and do not alert the reader that some of these risks

may already have come to fruition can mislead reasonable investors.’ ” Pet. App. 6a (quoting In re

Alphabet, Inc. Sec. Litig., 1 F.4th 687, 703 (9th Cir.

2021)). Based on that precedent, the court ruled that

risks can come to fruition even before the warned-of

event has occurred. According to the Ninth Circuit,

plaintiff ’s complaint plausibly alleged that, before the

IPO, atypical customers had informed ON24 of their

intent not to renew and that some “atypical customer

churn” had started to occur. Pet. App. 6a–7a. Based

on those allegations, the court concluded that plaintiff

had “sufficiently allege[d] that ON24 knew that the

risk of material churn and downselling had started to

come to fruition before the IPO yet disclosed only that

those risks may occur.” Pet. App. 6a (emphasis in

original).

In reaching this conclusion, the Ninth Circuit did

not—and could not—hold that plaintiff had plausibly

alleged that ON24 had experienced material non-renewals before the IPO. As plaintiff conceded, no

6 The Ninth Circuit affirmed the dismissal of one

statement of forward-looking opinion that is not at issue here. See Pet. App. 4a–5a.

significant pre-IPO contract expirations had occurred

before ON24’s IPO—to the extent there were any such

expirations at all. See C.A. Dkt. 56 at 12 (acknowledging that ON24’s new customers “were still within

their initial contract periods during the months following the IPO” such that ON24’s “revenues

remained temporarily elevated”). Instead, the Court

of Appeals based its conclusion on an allegation regarding a mere handful of six-month contracts that

were not renewed before the IPO. See Pet. App. 7a

(discussing “ON24 leadership’s knowledge of churn

with six-month contracts leading up to the IPO”). The

referenced contracts were only a few within a group

of 25 to 30, a tiny fraction of ON24’s customers. See

Pet. App. 26a–27a.

The Ninth Circuit thus held that ON24 was required to disclose that the risk of “material churn” the

company warned of had started to come to fruition

based solely on an immaterial number of pre-IPO nonrenewals; an unspecified number of customers’ statements about what they planned to do months in the

future depending on how the pandemic played out;

and ON24’s knowledge of that information. Pet. App.

6a–7a.

The Ninth Circuit also reversed the dismissal of

plaintiff ’s Item 303 claim for essentially the same reasons. Pet. App. 7a–8a. It held that the complaint

sufficiently alleged that ON24 had failed to disclose

known trends that were reasonably likely to have a

material unfavorable impact—here, “the change in

customer profiles that occurred before the IPO, ON24

leadership’s knowledge of several customers’ intent

not to renew or intent to downsell, and ON24

leadership’s knowledge of churn with six-month contracts leading up to the IPO.” Pet. App. 7a.

4. ON24 filed a petition for panel rehearing

and/or rehearing en banc, which was denied on March

9, 2026. Pet. App. 76a.

REASONS FOR GRANTING REVIEW

The Ninth Circuit’s precedent imposes expansive

disclosure requirements that far exceed those in any

other circuit. Those disclosure obligations create unworkable requirements for public companies, forcing

them to inundate investors with a flood of irrelevant

and speculative information. This division in the

courts of appeals will make the Ninth Circuit the preferred forum for plaintiffs alleging fraud-by-hindsight

after a stock drop. The Court should grant review to

bring the Ninth Circuit back in line with the text and

purpose of the securities laws, this Court’s precedent,

and the decisions of other circuit courts.

THE COURT SHOULD AGAIN GRANT

REVIEW TO RESOLVE A CIRCUIT SPLIT

ON WHAT RISK DISCLOSURES REQUIRE

The Ninth Circuit’s decision conflicts with three

other circuits on the question of whether risk disclosures are misleading when they describe risks as

hypothetical because they have not yet materialized.

The First, Third, and Tenth Circuits say no; the Ninth

Circuit says yes. This Court recently tried to resolve

this division by granting certiorari in Facebook but

dismissed the petition as improvidently granted. This

case presents the same legal conflict but with facts

that allow for a clean resolution of the question presented.

The First, Third, and Tenth Circuits

hold that risk disclosures are not

misleading when they describe as

hypothetical risks that have not yet

occurred and are not certain to occur

The Ninth Circuit’s outlier position on risk disclosures conflicts with that of three other circuits.7

The First Circuit has explained that “[i]f [a] company did not know with certainty that a risk would

materialize, it is not necessarily liable for characterizing that risk as a ‘future risk.’ ” Karth v. Keryx

Biopharmaceuticals, Inc., 6 F.4th 123, 138 (1st Cir.

2021) (quotation marks and alterations omitted). In

Karth, plaintiff alleged that several disclosures “were

misleading because each characterized the risk of a

supply interruption as hypothetical when, according

to [plaintiff], that disruption was actively occurring.”

Ibid. The First Circuit rejected that argument because plaintiff had not sufficiently alleged “that a

supply interruption was happening or was even close

While those courts considered claims under

Rule 10b–5, the relevant text of Rule 10b–5 is virtually identical to the text of Section 11(a) at issue here.

Compare 17 C.F.R. § 240.10b–5 (making it unlawful

“to omit to state a material fact necessary in order to

make the statements made, in light of the circumstances under which they were made, not

misleading”), with 15 U.S.C. § 77k(a) (making it unlawful to “omit[] to state a material fact . . . necessary

to make the statements [in a registration statement]

not misleading”). Thus, courts rely on cases interpreting Rule 10b–5 when interpreting the analogous text

of Section 11. See, e.g., Sodha, 154 F.4th at 1033 n.3.

to a ‘near certainty.’ ” Ibid. While a key manufacturer

was experiencing certain difficulties, plaintiff had not

sufficiently alleged that those problems “would necessarily yield an uncorrectable supply interruption.” Id.

at 139 (emphasis added). The securities laws “do[] not

require a company to be omniscient,” the First Circuit

explained, “even if the company looks foolish in hindsight for not properly predicting whatever harm befell

it.” Id. at 138.

The Third Circuit is in accord. In Williams v.

Globus Medical, Inc., 869 F.3d 235 (3d Cir. 2017), the

Third Circuit dismissed a challenge to risk disclosures that “warned that the loss of an independent

distributor could have a negative impact on sales.” Id.

at 241. The Third Circuit rejected plaintiffs’ argument that the disclosure misleadingly “omitted to

warn” that the company “had in fact lost an independent distributor.” Ibid. (emphasis in original). “The

risk actually warned of,” the Third Circuit explained,

was “the risk of adverse effects on sales—not simply

the loss of independent distributors generally.” Id. at

242. And that risk “only materialized” if “sales were

adversely affected.” Ibid. Thus, absent allegations

that the company “was already experiencing an adverse financial impact at the time of the risk

disclosures” or that such an impact “was inevitable,”

plaintiffs’ claim failed. Id. at 243.

Similarly, the Tenth Circuit has held that risk

disclosures are misleading only when the risk has materialized or is virtually certain to do so. In Indiana

Public Retirement System v. Pluralsight, Inc., 45

F.4th 1236 (10th Cir. 2022), for instance, defendants

had warned in risk disclosures that the company’s

business could be harmed if it failed to hire sufficient

sales representatives. Id. at 1254. Plaintiffs alleged

that those disclosures were misleading because defendants knew the company had already “fallen

behind its sales ramp capacity plan and would struggle to maintain its billings growth.” Id. at 1255. The

Tenth Circuit rejected that argument because “nothing in the complaint support[ed] the inference that

[d]efendants knew [the company] was so far behind in

its sales ramp capacity plan that it was virtually certain to cause harm to the business”—the risk warned

of. Id. at 1256–1257.

Accordingly, in the First, Third, and Tenth Circuits, if a risk has not yet occurred or is not virtually

certain to occur, it has not materialized, and disclosures describing that risk as hypothetical are thus not

misleading as a matter of law. Had this case been decided in those circuits, plaintiff ’s case could not have

proceeded.

ON24’s risk disclosures accurately

warned of risks that might occur, as it was not virtually certain when the pandemic would end and that a

material number of ON24’s customers would not renew their agreements post-IPO.

The Ninth Circuit holds that risks have

materialized even when they have not

yet occurred, and that disclosures

describing those risks as hypothetical

are thus misleading

Unlike those circuits requiring the warned-of

harm to have actually occurred or be virtually certain

to occur for a risk warning to be misleading, the Ninth

Circuit requires companies’ risk disclosures to predict

the future. Relying on its prior precedent, Alphabet,

1 F.4th 687, the Ninth Circuit held that ON24’s risk

disclosures—where ON24 expressly warned that a

material number of customers may not renew their

contracts if COVID-19 restrictions lessened—were

plausibly misleading because they did not reveal that

this risk had already started to come to fruition. Pet.

App. 6a–7a.

None of plaintiff ’s allegations demonstrate that

ON24’s revenue and revenue growth rate were already declining or would certainly decline, or that a

material number of new customers had already declined to renew or would certainly do so. Instead, the

Ninth Circuit relied on ON24’s failure to disclose immaterial instances of pre-IPO non-renewals and an

unspecified number of customers stating their thenfuture-intention not to renew their contracts—intentions that necessarily assumed the pandemic would

end shortly after February 2021. Pet. App. 6a. Those

past events do not establish that the risk warned of—

material non-renewal that would harm ON24’s business—had already occurred or would certainly occur.

Indeed, the warned-of risk did not, in fact, materialize: ON24’s subscription growth continued after the

IPO. By the end of 2021, ON24’s year-over-year revenue had increased by 30%, and its subscription

revenue specifically increased by 43%. 2 SER-384.

The Ninth Circuit’s decision thus turns the concept of risk materialization on its head: a warned-of

risk has materialized even if it has not occurred and

is not certain to occur. That reasoning replaces the

understandable and bright-line rule used by all other

circuits with a rule that demands speculation, at best,

and false certainty, at worst. The upshot of the Ninth

Circuit’s holding appears to be that once a company

becomes aware of the possibility of a material adverse

event, it must disclose that event as a certainty. That

rule poses enormous risks for issuers by exposing

them to liability for inaccurately predicting unknowables like the course of global events (e.g., the

duration of the COVID-19 pandemic) or the future actions of third parties (e.g., the decisions of individual

customers to renew or to cancel subscriptions based

on the outcome of such global events). The resulting

speculative, overstated risk disclosures will harm not

just issuers but investors, contrary to the purpose of

the securities laws.

This Court recognized the importance of this issue when it granted the petition for a writ of certiorari

in Facebook, another decision from the Ninth Circuit

presenting the same conflict. Unlike there, however,

the facts here permit clean resolution of the question

presented.

In Facebook, the Ninth Circuit—also relying on

its decision in Alphabet, 1 F.4th 687—held that warnings can be materially misleading even when the

warned-of business harm has not yet materialized. In

re Facebook, Inc. Sec. Litig., 87 F.4th 934, 948–950

(9th Cir. 2023). The case involved news that “Cambridge Analytica, a British political consulting firm,

improperly harvested personal data from millions of

unwitting Facebook users and retained copies of the

data beyond Facebook’s control.” Id. at 941. The

news emerged piecemeal over time as “Facebook and

its executives made various statements before and after the news announcements.” Ibid.

Shareholders brought suit under Section 10(b)

and Rule 10b–5 alleging, as relevant here, that “although Facebook knew Cambridge Analytica had

improperly accessed and used Facebook users’ data,

Facebook represented in its 2016 Form 10-K that only

the hypothetical risk of improper third-party misuse

of Facebook users’ data could harm Facebook’s business, reputation, and competitive position.” Id. at

948.

The Ninth Circuit allowed the suit to proceed,

holding—as it did in the decision below—that circuit

law “does not require harm to have materialized for a

statement to be materially misleading.” Id. at 949.

Disclosing a risk as a hypothetical one that may occur,

the Ninth Circuit reasoned, was misleading even

though “Facebook did not know whether its reputation was already harmed.” Id. at 950.

This Court granted Facebook’s petition for a writ

of certiorari, but oral argument brought out disputes

about the underlying facts and the scope of the Ninth

Circuit’s decision that complicated the Court’s review.

For example, as highlighted by the dueling majority

and dissenting opinions in the Ninth Circuit, confusion existed regarding whether the warned-of risk

was the risk of a data breach, which had already materialized, or the risk of harm to the business, which

had not. Compare 87 F.4th at 949 (majority opinion)

(“[T]he problem is that Facebook represented the risk

of improper access to or disclosure of Facebook user

data as purely hypothetical when that exact risk had

already transpired.”), with id. at 959 (Bumatay, J.,

concurring in part and dissenting in part) (“[A] careful

reading of the 10-K statements shows that these risk

factor statements warn about harm to Facebook’s

‘business’ and ‘reputation’ that ‘could’ materialize

based on improper access to Facebook users’ data—

not about the occurrence or non-occurrence of data

breaches.”).

Additionally, because some news about the Cambridge Analytica breach had been published in 2015

before Facebook’s 2016 risk disclosures, there was a

dispute about whether the facts Facebook failed to

disclose were already public knowledge such that

their disclosure or lack thereof would not have been

material. Compare 87 F.4th at 950 (majority opinion)

(“Notably, although the dissent seemingly perceives it

otherwise, the extent of Cambridge Analytica’s misconduct was not yet public when Facebook filed its

2016 10-K.”), with id. at 959 (Bumatay, J., concurring

in part and dissenting in part) (“[M]uch about the

Cambridge Analytica scandal was already public.”).

This case is not burdened with either complication. Plaintiff conceded that no significant pre-IPO

non-renewals occurred before the IPO, and the Ninth

Circuit did not—and could not—hold those few nonrenewals were material. And there is no question as

to what the relevant risk warned of here is: the risk

of material non-renewal that would harm the company’s financials. The Ninth Circuit thus went even

further here than it did in Facebook. The Facebook

majority (though not the dissent) had some basis to

conclude that the risk had materialized, though the

business harm had not yet occurred. Here, by contrast, the risk indisputably had not materialized

because neither material churn nor business harm occurred before the IPO.

This case thus squarely presents the question

whether describing unmaterialized risks as

hypothetical constitutes a misleading omission under

the securities laws.

II.

THE NINTH CIRCUIT’S LIMITLESS

DISCLOSURE RULE VIOLATES TEXT

AND PRECEDENT

Review also should be granted because this case

implicates the first question presented in the Robinhood petition: whether it violates Section 11(a) to

omit past information “that investors may consider

material, without an inquiry into whether the omission rendered any affirmative statement misleading.”

Robinhood Pet. I. The Ninth Circuit recognized the

connection between this case and Robinhood. It vacated submission of this case pending its Robinhood

decision and ordered supplemental briefing to address the effect of that decision. As in Robinhood, the

Ninth Circuit here held that plaintiff had sufficiently

alleged a Section 11(a) violation even though it failed

to show that the alleged omissions were material and

rendered a statement made misleading. That result

cannot be squared with the text of Section 11(a), this

Court’s decision in Macquarie, 601 U.S. 257, or the

decisions of other circuits. This Court recently called

for the views of the Solicitor General (“CVSG”) on the

questions presented in the Robinhood petition. At the

very least, therefore, this petition should be held

pending the Court’s resolution of that petition.

Absent a legal duty to disclose, an

omission is actionable only if it is

material and misleading

Under the plain text of the securities laws, an

omission must be both “material” and “misleading” to

be actionable.

Section 11(a) imposes liability

whenever a registration statement “omit[s] to state a

material fact . . . necessary to make the statements

therein not misleading.” 15 U.S.C. § 77k(a). Rule

10b–5 likewise makes it unlawful “to omit to state a

material fact necessary in order to make the statements made . . . not misleading.”

17 C.F.R.

§ 240.10b–5.

This Court recently confirmed that both elements are required. In Macquarie, 601 U.S. 257, the

question was “whether the failure to disclose information required by Item 303 can support a private

action under Rule 10b–5(b), even if the failure does

not render any ‘statements made’ misleading.” Id. at

260. The Court held that it cannot because “[p]ure

omissions are not actionable under Rule 10b–5(b).”

Ibid.

The Court explained that Rule 10b–5 “do[es] not

create an affirmative duty to disclose any and all material information.” Id. at 264. Rather, the Rule

“prohibits omitting material facts necessary to make

the ‘statements made . . . not misleading.’ ” Ibid.

“Logically and by its plain text, the Rule requires

identifying affirmative assertions (i.e., ‘statements

made’) before determining if other facts are needed to

make those statements ‘not misleading.’ ” Ibid.

Accordingly, the omission of material information is not sufficient to state a claim under Rule

10b–5 or, by extension, the misleading-omissions

prong of Section 11(a). An omission is actionable only

The duty to disclose legally required information under Section 11(a) is addressed separately

below. See infra pp. 26–29.

if it is both material and necessary to correct a misleading impression created by other statements.

Courts of appeals across the country have thus

properly treated the materiality and misrepresentation inquiries as distinct requirements under Section

11(a). See, e.g., Oxford Asset Mgmt., Ltd. v. Jaharis,

297 F.3d 1182, 1190 (11th Cir. 2002) (rejecting claim

that “issuers have a duty to disclose . . . all information material to the offering” because that rule

would “render superfluous that section’s qualifying

language ‘required to be stated therein or necessary

to make the statements therein not misleading’ ”);

Kapps v. Torch Offshore, Inc., 379 F.3d 207, 212 n.6

(5th Cir. 2004) (agreeing there is “no duty to disclose

in the prospectus all information material to the offering, but only that material information necessary

to make the statements in the prospectus not misleading” (citing Oxford Asset Mgmt, 297 F.3d at 1190)); In

re Adams Golf, Inc. Sec. Litig., 381 F.3d 267, 277 (3rd

Cir. 2004) (“A determination that information missing . . . is material does not end our analysis” because

“[w]e must also decide whether . . . the omission made

the statement misleading.”).

The Ninth Circuit’s decision conflicts

with

the

statutory

text

and

overwhelming precedent

The Ninth Circuit in Robinhood, however, effectively eliminated the need for an affirmative

misrepresentation, holding that “the inquiries as to

duty and materiality coalesce[d].” Sodha, 154 F.4th

at 1034. The first question presented in the Robinhood petition challenges the effective elimination of

the misrepresentation requirement by asking

“[w]hether an issuer violates Section 11(a)’s misleading-omissions prong by failing to disclose interim

financial data that investors may consider material,

without an inquiry into whether the omission rendered

any affirmative statement misleading.” Robinhood

Pet. I (emphasis added). The Solicitor General will

soon offer his views on that question in response to

the Court’s CVSG.

Here, the Ninth Circuit sidestepped both the materiality and misleading requirements. It held that

ON24 was required to disclose a handful of pre-IPO

non-renewals and some customers’ intent not to renew based on their predictions of how the COVID-19

pandemic would play out. Pet. App. 6a–7a. Yet those

facts were immaterial to the statements ON24 actually made. See supra pp. 12–13, 18–19. If Section

11(a) does not require disclosure of all material information, it certainly cannot require disclosure of

immaterial information.

Moreover, even assuming those facts were material, their omission did not render misleading the

challenged statements ON24 made about its customers and financial performance. Nothing in ON24’s

offering documents suggested that zero customers

had failed to renew their subscriptions or that zero

customers had expressed their intentions not to renew. Accordingly, the omission of immaterial nonrenewal information and customer speculation about

their future plans did not render any of ON24’s affirmative statements misleading—particularly in

light of ON24’s warnings that recovery from the

COVID-19 pandemic could trigger a material number

of non-renewals that would hurt the company’s business. The Ninth Circuit’s ruling thus ignores the

plain language of Section 11(a) and turns this Court’s

instructions on disclosure upside down.

The overlap between this petition and the Robinhood petition underscores the systemic importance of

the issue and the need for this Court’s guidance. At

minimum, the Court should hold this case pending

Robinhood.

III. THE NINTH CIRCUIT’S EXPANSION OF

THE DISCLOSURE OBLIGATION UNDER

ITEM 303 WARRANTS REVIEW

The second question presented in the Robinhood

petition asks the Court to clarify what disclosures are

required under Item 303. Robinhood Pet. I. In both

Robinhood and this case, the Ninth Circuit overlooked the regulation’s textual limits and imposed far

broader disclosure obligations than those imposed by

other circuits. The Court should either grant both petitions or hold this one pending Robinhood.

Item 303—which applies not just to IPOs, but to

all annual and quarterly reports for public companies—requires issuers to provide a “discussion and

analysis” of “material information” relevant to assessing the “financial condition and results of

operations” of the company. 17 C.F.R. § 229.303(a).

As relevant here, Subsection (b) requires the registrant to “[d]escribe any known trends or uncertainties

that have had or that are reasonably likely to have a

material favorable or unfavorable impact on net sales

or revenues or income from continuing operations.”

Id. § 229.303(b)(2)(ii). This means that a “disclosure

duty exists where a trend, demand, commitment,

event or uncertainty is both (1) presently known to

management and (2) reasonably likely to have

material effects on the registrant’s financial condition

or results of operation.” Steckman v. Hart Brewing,

Inc., 143 F.3d 1293, 1296 (9th Cir. 1998). Conversely,

no disclosure is required “[i]f management determines that” a “known trend, demand, commitment,

event or uncertainty” is “not reasonably likely to occur” or if management “determines that a material

effect on the registrant’s financial condition . . . is not

reasonably likely to occur” as a result of that trend.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations, 54 Fed. Reg.

22427, 22430 (May 24, 1989).

The text of Item 303 includes several built-in

limitations. First, it specifies that only “material” information must be disclosed. Second, the word

“trend” “require[s] an assessment of whether an observed pattern accurately reflects persistent

[business] conditions.” Oxford Asset Mgmt., 297 F.3d

at 1191. Third, the “obvious focus” of Item 303 “is on

preventing the latest reported results from misleading potential investors, thereby promoting a more

accurate picture of the registrant’s future prospects.”

Id. at 1192 (emphasis added).

The Fifth and Eleventh Circuits have adhered to

these limitations in interpreting Item 303. In Kapps,

379 F.3d 207, the Fifth Circuit held that Item 303 did

not require disclosure of a “60% decrease in the price

of natural gas during the months before the prospectus was issued.” Id. at 218. Disclosure was not

required, the Fifth Circuit explained, because the

price decline was not yet a trend; the decline had not

yet significantly affected the company’s gross revenue; and the company had highlighted the volatility

of natural gas prices in its prospectus. Id. at 217–221.

Likewise, in Oxford Asset Management, 297 F.3d

1182, the Eleventh Circuit held that Item 303 did not

require the company to disclose that prescription

sales were not on track to meet projections. Id. at

1189–1192. The Eleventh Circuit explained that the

company’s initial sales data did not necessarily constitute a trend and that the new data did not render

the previously reported results misleading. Ibid.

Unlike those courts, the Ninth Circuit recognized none of Item 303’s textual limitations. As noted,

it required the disclosure of immaterial information—

an inconsequential number of pre-IPO non-renewals

and customers’ predictions of their future actions

based on global uncertainties. And the court did not

analyze whether those non-renewals reflected a

“trend” with respect to either quantity or temporal

duration. Contra Kapps, 379 F.3d at 218 (“[A]t the

time of the IPO, it was not unreasonable to consider

the decline in natural gas prices as not yet constituting a trend, having not significantly impacted [the

company’s] gross revenue.”); Nguyen v. MaxPoint Interactive, Inc., 234 F. Supp. 3d 540, 546 (S.D.N.Y.

2017) (“[E]vents occurring within a two month period

of time do not establish a ‘trend’ for purposes of the

disclosures required by Item 303.”). Nor did it consider the fact that revenue continued to rise in the

year after the IPO, which shows that the trend was

actually one of continued growth. See supra pp. 9, 18.

The result is a boundless disclosure obligation

under Item 303 that cannot be squared with the general rule that companies have no “obligation to

disclose the results of a quarter in progress.” Nguyen,

234 F. Supp. 3d at 546; see also, e.g., Glassman v.

Computervision Corp., 90 F.3d 617, 632 (1st Cir. 1996)

(“[W]e reject any bright-line rule that an issuer engaging in a public offering is obligated to disclose

interim operating results for the quarter in progress

whenever it perceives the possibility that the quarter’s results may disappoint the market.”).

By calling for the views of the Solicitor General

in Robinhood, the Court recognized the importance of

this question. The Court should either grant review

to clarify the limits of Item 303’s disclosure obligations or hold this petition pending its resolution of the

Robinhood petition.

IV. THE QUESTIONS PRESENTED ARE

RECURRING

AND

EXCEPTIONALLY

IMPORTANT

The Ninth Circuit’s decision effectively holds

that ON24 is liable for failing to predict, with certainty, during the height of the COVID-19 pandemic

lockdowns, how the course of the pandemic, government restrictions on in-person gatherings, and

idiosyncratic customer responses would play out and

affect the company’s business. That reasoning can,

and likely will, be weaponized by investors alleging,

with 20-20 hindsight, that companies should have

been able to predict the future.

Under the Ninth Circuit’s decision, issuers must

predict that a material adverse event will occur—not

just that it may occur—based on immaterial past

events and speculation over third-party future actions, or else be charged with misleading its investors.

That rule will compel issuers to predict the worst-case

scenario, thus distorting the market—and exposing

issuers to charges of speculation about third parties’

future actions. And it will drive issuers to “bury the

shareholders in an avalanche of trivial information”

in hopes of avoiding liability. TSC Indus., 426 U.S. at

448–449. All of that will drastically reduce the usefulness of risk disclosures, an outcome that harms the

very investors the securities laws are designed to protect. The Ninth Circuit’s approach is also at odds with

the SEC’s recent efforts to streamline disclosures for

investors.9

The Court recognized the importance of these issues when it granted the Facebook petition, and the

Court’s CVSG in the Robinhood petition reinforces

the need for this Court’s intervention. The Court

should grant this petition to clarify the scope of issuers’ disclosure obligations under the securities laws.

CONCLUSION

The petition should be granted.

9 See, e.g., Semiannual Reporting, 91 Fed. Reg.

24968 (proposed May 7, 2026) (to be codified at 17

C.F.R. §§ 200, 210, 229, 230, 232, 239, 240 249, 260);

Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for

Reporting Companies, 91 Fed. Reg. 30086 (proposed

May 21, 2026) (to be codified at 17 C.F.R. §§ 210, 229,

230, 232, 239, 240, 249).

Respectfully submitted,

DAVID J. WIENER

ANNA ERICKSON WHITE

MORRISON & FOERSTER LLP

425 Market Street

San Francisco, CA 94105

BRIAN R. MATSUI

Counsel of Record

MORRISON & FOERSTER LLP

2100 L Street NW, Suite 900

Washington, DC 20037

(202) 887-8784

BMatsui@mofo.com

LAUREN PARDEE RUBEN

MORRISON & FOERSTER LLP

370 17th Street

ALEXANDRA M. AVVOCATO

Denver, CO 80202

MORRISON & FOERSTER LLP

250 West 55th Street

New York, NY 10019

Counsel for ON24, Inc.

THOMAS M. PETERSON

CHARLENE S. SHIMADA

KEVIN M. PAPAY

MORGAN, LEWIS & BOCKIUS LLP

600 Montgomery Street

Suite 2300

San Francisco, CA 94111

(415) 442-1000

thomas.peterson@morganlewis.com

Counsel for Goldman Sachs & Co. LLC; J.P. Morgan

Securities LLC; KeyBanc Capital Markets Inc.; Robert W.

Baird & Co. Incorporated; Canaccord Genuity LLC;

Needham & Company, LLC; Piper Sandler & Co.; and

William Blair & Company L.L.C.

JUNE 2026

APPENDIX

TABLE OF CONTENTS

APPENDIX A

Memorandum Disposition of the

United States Court of Appeals

for the Ninth Circuit

(January 7, 2026) ........................ 1a

APPENDIX B

Order of the United States

District Court for the Northern

District of California Granting

Motion to Dismiss With Prejudice

and Motion for Joinder

(March 5, 2024)............................ 9a

APPENDIX C

Order of the United States

District Court for the Northern

District of California Granting

Motion to Dismiss and Motion

for Joinder

(July 7, 2023) ............................. 35a

APPENDIX D Order of the United States

Court of Appeals for the Ninth

Circuit Denying Petition for

Panel Rehearing or Rehearing

En Banc

(March 9, 2026).......................... 76a

APPENDIX E

Corporate Disclosure

Statement .................................. 77a

APPENDIX F

15 U.S.C. § 77k(a) ...................... 80a

APPENDIX G 17 C.F.R. § 229.303 ................... 82a

APPENDIX A

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE: ON24, INC.

SECURITIES LITIGATION

No. 24-2204

LEADERSEL INNOTECH ESG,

D.C. No.

4:21-cv-08578-YGR

Plaintiff-Appellant,

MEMORANDUM*

ON24, INC.; SHARAT SHARAN;

STEVEN VATTUONE; DENISE

PERSSON; HOLDGER STAUDE;

DOMINIQUE TREMPONT;

BARRY ZWARENSTEIN;

GOLDMAN SACHS & CO. LLC;

J.P. MORGAN SECURITIES

LLC; KEYBANC CAPITAL

MARKETS INC.; ROBERT W.

BAIRD & CO. INCORPORATED;

CANACCORD GENUITY LLC;

NEEDHAM & COMPANY, LLC;

PIPER SANDLER & CO.;

WILLIAM BLAIR & COMPANY,

L.L.C.; IRWIN FEDERMAN,

Defendants-Appellees.

Appeal from the United States District Court

for the Northern District of California

Yvonne Gonzalez Rogers, District Judge, Presiding

Argued and Submitted March 4, 2025

Submission Vacated August 26, 2025

Resubmitted January 5, 2026

Pasadena, California

* This disposition is not appropriate for publication and is

not precedent except as provided by Ninth Circuit Rule 36-3.

Before: MURGIA, Chief Judge, and SANCHEZ and

H.A. THOMAS, Circuit Judges.

Leadersel Innotech ESG (“Leadersel”) brings

this class action on behalf of all persons and entities

who purchased or otherwise acquired Defendant

ON24, Inc.1 (“ON24”) publicly traded common stock

pursuant to the public offering documents issued in

connection with ON24’s initial public offering

(“IPO”).2 Leadersel alleges that the public offering

documents contained six materially misleading statements. These statements allegedly omitted facts

related to ON24’s material churn—the rate at which

customers discontinue their relationship with the

business—that occurred in advance of the IPO and

the change in ON24’s customer base. Leadersel offers

two distinct theories of liability related to the alleged

omissions: (1) a primary violation of Section 11 of the

Securities Act of 1933, and (2) a violation of Item 303

of Securities and Exchange Commission (“SEC”) Regulation S-K.3 Leadersel also alleges that the

1 ON24 is a company that offers an online platform to businesses to generate revenue through interactive webinars, virtual

events, and multimedia content experiences.

2 Defendants are the following: ON24, Inc.; Sharat Sharan,

Steven Vattuone, Irwin Federman, Denise Persson, Holger

Staude, Dominique Trempont, and Barry Zwarenstein (together,

“Individual Defendants”); and Goldman Sachs & Co. LLC, J.P.

Morgan Securities LLC, KeyBanc Capital Markets Inc., Robert

W. Baird & Co. Incorporated, Canaccord Genuity LLC, Needham

& Company, LLC, Piper Sandler & Co., and William Blair &

Company, L.L.C. (together, “Underwriter Defendants”).

3 After publication of the Court’s decision in Sodha v. Golu-

bowski, 154 F.4th 1019 (9th Cir. 2025), Leadersel withdrew its

17 C.F.R. § 229.105 (“Item 105”) claim.

individually named defendants—officers and directors of ON24—are liable under Section 15 for

directing and controlling ON24 when these alleged

Section 11 violations occurred. The district court dismissed the complaint with prejudice. We have

jurisdiction under 28 U.S.C. § 1291. We affirm in part

and reverse in part and remand.

We review the district court’s order dismissing

the complaint de novo. Friedman v. AARP, Inc., 855

F.3d 1047, 1051 (9th Cir. 2017). “Review is limited to

the contents of the complaint . . . [and a]ll allegations

of material fact are taken as true and construed in the

light most favorable to the nonmoving party.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th

Cir. 2001) (citation omitted). We may affirm on any

ground supported by the record. Salameh v. Tarsadia

Hotel, 726 F.3d 1124, 1129 (9th Cir. 2013).

1. We affirm the district court’s dismissal of

claims that are based on Statement 3. “[S]ection 11 of

the 1933 Securities Act creates a private remedy for

any purchaser of a security if ‘any part of the registration statement, when such part became effective,

contained an untrue statement of a material fact or

omitted to state a material fact required to be stated

therein or necessary to make the statements therein

not misleading.’” In re Daou Sys., Inc., 411 F.3d 1006,

1027 (9th Cir. 2005) (quoting 15 U.S.C. § 77k(a)), abrogated on other grounds by Matrixx Initiatives, Inc.

v. Siracusano, 563 U.S. 27 (2011). Statement 3, describing ON24’s belief that it had the opportunity to

achieve significant future growth is a forward-looking

opinion that would not have misled a reasonable investor. See Omnicare, Inc. v. Laborers Dist. Council

Constr. Indus. Pension Fund, 575 U.S. 175, 186, 189–

90 (2015) (holding that “opinions sometimes rest on a

weighing of competing facts[,]” and “a sincere statement of pure opinion is not an ‘untrue statement of

material fact,’ regardless whether an investor can ultimately prove the belief wrong”).

2. We reverse the district court’s dismissal of

Section 11 claims based on the remaining five statements: Statement 1, describing a “highly engaged and

loyal customer base”; Statement 2, recognizing acceleration in revenue growth rate due to the COVID-19

pandemic; Statement 4, describing a potential reduction in product demand post-pandemic; Statement 5,

describing a potential decline in the revenue growth

rate post-pandemic; and Statement 6, describing the

possibility that subscription renewals and upselling

may decline in the future.

To allege a Section 11 claim, a plaintiff must

show “(1) that the registration statement contained

an omission or misrepresentation, and (2) that the

omission or misrepresentation was material, that is,

it would have misled a reasonable investor about the

nature of his or her investment.” Rubke v. Capitol

Bancorp Ltd., 551 F.3d 1156, 1161 (9th Cir. 2009) (internal quotations and citation omitted). “Section 11

does not require the disclosure of all information a potential investor might take into account when making

his decision.” Id. at 1163. However, at the pleading

stage, “Section 11 places a relatively minimal burden

on a plaintiff[:] . . . he need only show a material misstatement or omission to establish his prima facie

case.” Hildes v. Arthur Andersen LLP, 734 F.3d 854,

859 (9th Cir. 2013) (internal quotations and citation

omitted). Because Leadersel’s Section 11 claim does

not “sound in fraud,” it must only meet Rule 8(a)’s

ordinary notice pleading requirements. Daou, 411

F.3d at 1027.

Construing the allegations in the light most favorable to Leadersel, the complaint contains plausible

allegations, corroborated by confidential witnesses4,

that, during the COVID-19 pandemic, atypical customers engaged ON24 for short-term subscriptions of

one-year or less and informed ON24 of their intent to

either downsell—downgrade to a cheaper subscription—or not renew these short-term subscriptions.

The complaint contains plausible allegations that

ON24 systematically tracked its data regarding customer churn risk and actual churn occurrences. The

complaint also contains plausible allegations that

atypical customer churn and downsell began to occur

prior to the 2021 IPO and continued thereafter when

ON24 failed to meet its projected mid-year revenue

goals within months after the IPO. Accordingly,

Leadersel sufficiently alleges that ON24 knew that

the risk of material churn and downselling had

started to come to fruition before the IPO yet disclosed

only that those risks may occur. “Risk disclosures that

speak entirely of as-yet-unrealized risks and contingencies and do not alert the reader that some of these

risks may already have come to fruition can mislead

reasonable investors.” In re Alphabet, Inc. Sec. Litig.,

1 F.4th 687, 703 (9th Cir. 2021) (quoting Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 985–87 (9th

Cir. 2008) (internal quotations and alterations omitted)). Leadersel’s allegations, if taken as true, are

consistent with Leadersel’s theory that the change in

4 Leadersel relies on the statements of eight former ON24

employees to substantiate its allegations.

customer base negatively impacted ON24’s future

growth rate and that the change should have been

specifically disclosed to potential stockholders.5 As

such, Leadersel adequately pled its Section 11 claim.

3. We also reverse the district court’s dismissal

of Leadersel’s alleged 17 C.F.R. § 229.303 (“Item 303”)

violation. Item 303 requires the registrant to

“‘[d]escribe any known trends or uncertainties that

have had or that are reasonably likely to have a material favorable or unfavorable impact on net sales or

revenues or income from continuing operations.’” Sodha, 154 F.4th at 1037 (alteration in original)

(quoting 17 C.F.R. § 229.303(b)(2)(ii)). “Item 303 ‘specifies its own standard for disclosure—i.e., reasonably

likely to have a material effect’ and requires more disclosure than the materiality test typically used in

securities law.” Id. at 1041 (quoting In re NVIDIA

Corp. Secs. Litig., 768 F.3d 1046, 1055 (9th Cir.

2014)).

Leadersel alleges that ON24 violated Item 303

because the risk disclosures did not disclose the

change in customer profiles that occurred before the

IPO, ON24 leadership’s knowledge of several customers’ intent not to renew or intent to downsell, and

ON24 leadership’s knowledge of churn with sixmonth contracts leading up to the IPO. Leadersel

5 The district court erred by improperly relying on judi-

cially noticed revenue and ARR data to dispute Leadersel’s

plausible theory of liability. Khoja v. Orexigen Therapeutics, Inc.,

899 F.3d 988, 1003 (9th Cir. 2018) (explaining that it is improper

for a district court “to assume the truth of an incorporated document if such assumptions only serve to dispute facts stated in a

well-pleaded complaint”).

further alleges that ON24’s leadership methodically

tracked this information in ON24’s Salesforce software and held meetings with ON24 management

regarding customers’ churn risk leading up to the

IPO. These allegations are sufficient at this stage to

allege a violation of Item 303. See Steckman v. Hart

Brewing, Inc., 143 F.3d 1293, 1297 (9th Cir. 1998)

(holding that when future impacts are reasonably

likely to occur, “they cease to be optional forecasts and

instead become present knowledge subject to the duty

of disclosure”).

4. Because we reverse, in part, the district court’s

dismissal of Plaintiffs’ Section 11 claims, we also reverse the dismissal of the derivative Section 15 claim.

See In re Rigel Pharms., Inc. Sec. Litig., 697 F.3d 869,

886 (9th Cir. 2012) (explaining that a Section 15 claim

requires an underlying primary violation of securities

law).

AFFIRMED in part, REVERSED in part, AND

REMANDED. The parties shall bear their own costs

on appeal.

APPENDIX B

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

IN RE ON24, INC.

SECURITIES LITIGATION

Case No.:

4:21-cv-8578-YGR

ORDER GRANTING

THE MOTION TO

DISMISS WITH

PREJUDICE

ORDER GRANTING

THE MOTION FOR

JOINDER

Re: Dkt. Nos. 105

and 106

Pending before the Court is defendants’1 Motion

to Dismiss the First Amended Consolidated Class Action Complaint (“FACCAC”).2 (Dkt. No. 105.) The

FACCAC alleges violations of the Securities Act of

1933 in connection with the initial public offering

(“IPO”) of ON24. The Court had previously granted

1 Defendants are: ON24, Inc. (“Corporate Defendant”),

Sharat Sharan, Steven Vattuone, Irwin Federman, Denise

Persson, Holger Staude, Dominique Trempont, Barry Zwarenstein (together, “Individual Defendants”), and Goldman Sachs &

Co. LLC, J.P. Morgan Securities LLC, KeyBanc Capital Markets

Inc., Robert W. Baird & Co. Incorporated, Canaccord Genuity

LLC, Needham & Company, LLC, Piper Sandler & Co., and William Blair & Company, L.L.C.’s (together, “Underwriter

Defendants”).

2 Underwriter Defendants once again filed a Motion for

Joinder. (Dkt. No. 106.) That motion is GRANTED.

10a

defendants’ motion to dismiss in large part because

plaintiff’s confidential witnesses did not provide a sufficient factual foundation for its theory that demand

for ON24’s products declined to the point that withholding that information materially misled

investors.3 (Dkt. No. 96, “Previous Order.”) Defendants argue that plaintiff’s FACCAC is still fatally

conclusory. The Court agrees.

Having carefully considered the papers submitted and the argument presented at the February 6,

2024, hearing, and for the reasons set forth below, the

Court GRANTS defendants’ motion to dismiss WITH

PREJUDICE.

BACKGROUND

The Court assumes the parties’ familiarity with

the background in this case, which was detailed in its

Previous Order. (Dkt. No. 96.) In its FACCAC, plaintiff adds the following allegations:

In the nine months leading up to September 30,

2020, ON24’s revenue increased by 59%. (FACCAC

¶ 7.) Its customer based increased from 1,241 customers as of December 31, 2018, to 1,918 customers by the

end of September of 2020. ON24’s Annual Recurring

Revenue (“ARR”) grew similarly, from $61.2 million

at the end of 2018 to $138.9 million by September 30,

2020. On February 3, 2021, ON24 conducted its IPO.

3 The Court had also previously granted defendants’ re-

quest for judicial notice of the same exhibits they attach now to

the motion to dismiss. For the reasons previously stated, judicial

notice of these exhibits remains appropriate on the same

grounds. (See Dkt. No. 96.)

11a

(Id.) It focused “heavily” on these September 30, 2020,

results in doing so. (Id. ¶ 8.)

Unbeknownst to investors, however, in the three

quarters preceding the IPO, ON24 changed its business model from focusing on acquiring long-term,

“enterprise” customers to short-term, small- to medium-sized business (“SMB”) customers. (Id. ¶ 9.)

Acquired mostly from March 2020 to July 2020, these

new customers were “atypical” or “COVID” customers

who signed up for one-year or less contracts. (Id. ¶¶ 9,

14.)

The FACCAC expands on the testimony of one

confidential witness and includes testimony from

three new ones as follows:

Confidential Witness Two (“CW2”):

CW2 had managed 100 to 150 accounts in

2020. (Id. ¶ 97.) In the first nine months of

2020, ON24 gained an influx of new,

COVID-era customers which took place in

March to May of 2020 and then again in

June and July of 2020. (Id. ¶ 103.) In fact,

CW2 claims he received three to five new

contracts “a day” during 2020 because

ON24 was “signing on anyone.” (Id. ¶ 104.)

He stated, however, that ON24 faced high

churn, or turnover, from these customers

and that there were “instances” of 40–50%

churn amongst his customers. (Id. ¶ 14.)

CW2 clarified that these “instances” were

specific to new, COVID-era clients. (Id.)

CW2 then “recalled that 80% of new customers acquired after the COVID pandemic

(beginning in March 2020) told him six

12a

months in advance that they would not be

renewing their contracts” because their contract with ON24 was “simply a COVID

related expense.” (Id. ¶ 16.) Later, CW2

states that he saw a “churn risk” of $70,000

to $100,000, which represented “several

contracts a month.” (Id. ¶ 104.) When CW2

realized that customers were unlikely to renew, he marked them as “DNR” or “do not

renew” in Salesforce. (Id. ¶ 106.) According

to CW2, 40–50% of customers signed on

during 2020 were marked “DNR.” (Id.

¶ 107.) CEO Sharan was aware of these

churn risks and directed his employees “to

stop talking about churn and anything negative in general” in the lead up to the IPO.

(Id. ¶ 109.)

Confidential Witness Six (“CW6”): CW6

was a Senior Enterprise Customer Success

Manager from the spring of 2020 until after

ON24’s IPO. (Id. ¶ 149.) CW6 noted that

ON24 took on “‘a lot of COVID” or “atypical,

smaller customers,” in April, May, and June

2020. (Id. ¶ 150.) CEO Sharan would attend

the sales and client success meetings and

had a habit of “dressing people down” at

them. (Id. ¶ 151.) CW6 and his team would

“consistently” send reports up to the CLevel Executives, including CEO Sharan,

about customer “Health Scores,” which

were color-coded charts of customers’

strength of engagement. (Id. ¶ 152.) According to CW6, “he became aware a customer

may churn as early as six months in

13a

advance.” (Id. ¶ 153.) When churn was a

risk for a customer, he sent up these Health

Scores to executives. (Id.) CW6 noted that

the company implemented new processes to

determine when a customer was at risk of

churning and then new “ways to keep the

customer on board, such as adjusting pricing.” (Id. ¶ 154.) Depending on the size of

the customers, CW6 noted, there might be a

specific conversation on “how to retain their

business.” (Id.)

Confidential Witness Seven (“CW7”):

CW7 was a Customer Success Manager for

years prior to the IPO and until 2022. (Id.

¶ 156.) According to CW7, “in the early

stages of COVID, [ON24] was signing ‘a ton’

of short-term event-based deals with subscriptions of one-year or less that were

different than the typical deal ON24 signed

with customers.” (Id. ¶ 158.) CW7 explained

that “these customers churned at a ‘super

high rate,’” or a churn of “upwards of 80%.”

(Id. ¶ 19.) CW7 also states these customers

had “a high probability of churn as early as

one month after they had signed their initial contract.” (Id.) As an example, CW7

states that out of 80–100 accounts he had in

2020, 25–30 did not renew their subscription with ON24. (Id.) Separately, however,

CW7 stated that in 2021 20% of his customers had been marked “for high churn risk.”

(Id. ¶ 160.) CW7 explained that he knew

these customers had a high probability of

churning not because his customers told

14a

him but because he would see that a customer “had only used the platform once

after several months, a fact which to him

was indicative of high likelihood of churn.”

(Id. ¶ 160.) Though most customers signed

up during the COVID influx had one-year

contracts that would be due in 2021, “there

were a handful of six-month deals.” (Id.

¶ 161.) CW7 recalled instances CEO Sharan

attended sales and client success meetings

and poured through the high risk and high

probability of churn accounts. (Id. ¶ 162.) Finally, CW7 stated, looking at the

projections for the first two quarters of

2021, the “high risk of churn was looming.”

(Id. ¶ 163.)

Confidential Witness 8 (“CW8”): CW8

was a Senior Customer Success Manager

“responsible for churn.” (Id. ¶ 20.) He explained that, out of approximately 137

customers, he estimated in 2020 that 43% of

his accounts “were going to churn or downsell.” (Id. ¶ 168.) He also recalled that,

during 2020, “50% of new accounts that

were up for renewal were likely to churn.”

(Id. ¶ 168.) He then stated that, looking

ahead to 2021, he estimated that “he would

have a 30% renewal rate.” (Id. ¶ 170.) CW8

recalled an unspecified number of “instances where a Company signed and then

wished to cancel their contract after only a

few months.” (Id. ¶ 169.) This chance of

churn was known to CEO Sharan, who CW8

recalled stating that these atypical

15a

customers were not “ideal” but were a “revenue generator.” (Id. ¶ 22.) CEO Sharan was

closely involved, attending meetings that

would last close to four hours and where

CEO Sharan would discuss even low value

accounts to determine how to deal with potential churn. (Id. ¶ 165.) CW8 felt that CEO

Sharan would “hammer” or “belittle” the

customer success managers once the customers signed on in 2020. (Id. ¶ 168.)

The FACCAC challenges the following six statements from the Offering Documents, all of which

plaintiff challenged in its original complaint:

Statement 1 (id. ¶ 175)4:

As of September 30, 2020, we had over

1,900 customers in more than 40 countries,

including three of the five largest global

technology companies, four of the five largest U.S. banks, three of the five largest U.S.

banks, three of the five largest global

healthcare companies and three of the five

largest global industrial and manufacturing

companies, in each case measured by 2019

revenue. No single customer contributed

more than 5% of our total revenue for the

year ended December 31, 2019 or for the

nine months ended September 30, 2020. We

have a highly engaged and loyal customer base that has allowed us to grow

4 All emphasis shown, again, originates from the FACCAC.

Plaintiff notes it only challenges the emphasized portions of the

statements; the rest is provided for context.

16a

our revenue with them over time, and

achieve an NRR of 147% as of September

30, 2020. Our NRR was 107% and 108% as

of December 31, 2018 and December 31,

2019, respectively.

Statement 2 (id. ¶ 177):

Key Factors Affecting Our Performance

***

Annual Recurring Revenue

We believe that ARR is a key metric to

measure our business because it is driven

by our ability to acquire new subscription

customers and to maintain and expand our

relationship with existing subscription contracts as of the measurement date,

including existing customers with expired

contracts that we expect to be renewed. Our

ARR amounts exclude professional services,

overages from subscription customers and

Legacy revenue. Our ARR was $61.2 million

as of December 31, 2018, $63.6 million as of

March 31, 2019, $67.2 million as of June 30,

2019, $70.0 million as of September 30,

2019, $76.9 million as of December 31, 2019,

$85.9 million as of March 31, 2020, $114.2

million as of June 30, 2020, and $138.9 million as of September 30, 2020. Our

consistent ARR growth each quarter reflects our success in acquiring new

customers and expanding subscriptions with existing customers, which

was occurring prior to the COVID-19

17a

pandemic and has accelerated in 2020

partly in response to the COVID-19 pandemic.

Statement 3 (id. ¶ 179):

We believe we can achieve significant

growth by retaining and further penetrating our existing customer base with

the addition of new users and new products, and through upsell and cross sell.

Our multi-dimensional land and expand

model drives onboarding and allows us to

acquire customers via free trials, live demos

and continuous engagement with an efficient sales and marketing investment. As

we continue to drive more actionable revenue generating marketing insights, we

believe that we have a significant opportunity to further increase sales among

existing customers across different

functional and geographic departments

within

each

respective

organization. Our ability to pursue this

opportunity will require us to scale our sales

and marketing organizations and otherwise

increase our operating expenses, and we

may not be successful on the timetable we

anticipate, or at all, for any number of reasons, which may cause our results to vary

from period to period.

Statement 4: (id. ¶ 181):

We may not be able to sustain our recent

revenue growth rate in the future.

18a

For the year ended December 31, 2019, our

revenue increased by 8% as compared to the

year ended December 31, 2018. We have experienced significant revenue growth

during 2020, with our revenue increasing by

59% for the nine months ended September

30, 2020 as compared to the nine months

ended September 30, 2019. Our recent revenue growth has been significantly

impacted by an increasing demand for

our platform and products following

the onset of the COVID-19 pandemic

and resulting precautionary measures.

As the impact of COVID-19 lessens,

there may be reduced demand for our

platform, and our revenue growth rate

may decline. If these new customers

elect not to continue their subscriptions

as the impact of COVID-19 lessens, our

business, financial condition and results of operations would be harmed.

Statement 5: (id. ¶ 182):

Our quarterly results may fluctuate significantly and may not fully reflect the

underlying performance of our business.

Our quarterly results of operations and financial condition may vary significantly in

the future, and period-to-period comparisons may not be meaningful. Accordingly,

the results of any one quarter should not be

relied upon as an indication of future performance. Our quarterly results of

19a

operations and financial condition may fluctuate as a result of a variety of factors,

many of which are outside of our control and

may not fully reflect the underlying performance of our business. For example, our

revenue and revenue growth rate may

decline in future periods compared to

2020 as the impact of COVID-19 lessens.

Further, because we generally invoice our

customers at the beginning of the contractual terms of their subscriptions to our

solutions, our financial condition reflects

deferred revenue that we recognize ratably

as revenue over the contractual term. If

fewer new enrollments or renewals occur as the impact of COVID-19 lessens,

our cash and deferred revenue as of future dates may decrease. Fluctuation in

quarterly results may negatively impact the

value of our securities. Factors that may

cause fluctuations in our quarterly results or operations include:

•

Our ability to retain and expand

customer usage;

•

Our ability to attract new customers.

Statement 6: (id. ¶ 183):

Failure to attract new customers or retain, expand the usage of, and upsell

our products to existing customers

would harm our business and growth

prospects.

20a

We derive, and expect to continue to derive,

a significant portion of our revenue and

cash flows from sales of subscriptions to our

products. As such, our business depends on

our ability to attract new customers and to

maintain and expand our relationships with

our existing customers, including by expanding their usage and upselling

additional solutions. Our business is largely

subscription-based, and customers are not

obligated to and may not renew their subscriptions after their existing subscriptions

expire. As a result, customers may not

renew their subscriptions at the same

rate, increase their usage of our solutions or purchase subscriptions for

additional solutions, if they renew at

all. Renewals of subscriptions may decline or fluctuate because of several

factors, such as dissatisfaction with

our solutions or support, a customer no

longer having a need for our solutions

or the perception that competitive products provide better or less expensive

options. In order to grow our business, we

must continually add new customers and

replace customers who choose not to continue to use our platform. Any decrease in

user satisfaction with our solutions or support may result in negative online customer

reviews and decreased word-of-mouth referrals, which would harm our brand and our

ability to grow.

21a

In addition to striving to attract new

customers to our platform, we seek to

expand the usage of our solutions by

our existing customers by increasing

the number of departments, divisions

and teams that use our solutions within

each of our customers. If we fail to expand the usage of our solutions by

existing customers or if customers fail

to purchase other solutions from us, our

business, financial condition and results of operations would be harmed.

Again, plaintiff does not allege that these six

statements were misleading on their own. Instead,

plaintiff argues that the challenged statements were

misleading when made because they failed to disclose

that:

Beginning with the onset of the COVID-19

pandemic in March 2020, the Company’s

customer base had transitioned from carefully courted, enterprise customers to a

growing influx of SMB customers, which

historically did not have good retention

rates, that entered into short-term and/or

single event-based deals with subscriptions

of one-year or less (id. ¶ 176(a))

It was known at the Company prior to the

IPO that a material amount of “atypical” or

“COVID” customers entered into subscriptions for short-term use or single events and

many other customers had expressly informed members of ON24’s sales and

customer service teams in 2020 that they

22a

were going to downsell or not renew their

subscriptions when they came due (id.

¶ 176(b))

It was known at the Company prior to the

IPO that a material amount of services that

enterprise customers added during the

COVID-19 pandemic were or would be subject to downsell (id. ¶ 176(c))

Because the Company entered into subscription deals during this time period with

terms less than one-year, including sixmonth subscriptions, atypical subscriptions

began to churn prior to the IPO (id.

¶ 176(d))

The material churn, e.g., lack of loyalty,

that had occurred prior to the IPO and was

knowingly going to continue and amplify after the IPO was reported prior to the IPO

through an indicator in the Company’s

Salesforce computer program, generated

into reports for management, and discussed

with management, including Defendant

Sharan, at sales meetings and companywide all hands meetings (id. ¶ 176(e))

The fact that a material amount of customers were not using the platform or only used

it once, e.g., were not highly engaged, was

also captured prior to the IPO through the

Company’s Totango computer program,

which tracked every interaction with the

Company’s customers, and Totango calculated a “Health Score” based on this “use”

matrix. The Health Scores like reports

23a

generated through Salesforce, were discussed with management, including

Defendant Sharan, because it indicated

that these customers were or would be

downselling their subscriptions or not renewing their subscription. (Id. ¶ 176(f).)

II.

LEGAL FRAMEWORK

The Court incorporates the legal standard from

its Previous Order. The legal standards under Fed. R.

of Civ. P. 8 and 12(b)(6) are well-known and not in

dispute.

III. ANALYSIS

SECTION 11

Plaintiff again alleges that the six statements

challenged are all misleading for the same reason.

During the first nine months of 2020, in response to

the COVID-19 pandemic, ON24 changed its business

strategy to pursue one-year contracts with atypical

customers that it knew by the time of its IPO, in February 2021, would not renew their subscriptions.

Because the resulting customer churn was material,

plaintiffs argue that defendants violated Section 11

by failing to inform potential investors of this already

existing risk. Defendants again respond that plaintiff’s Section 11 claim should be dismissed because its

theory of the case is: (1) internally inconsistent; (2)

belied by ON24’s actual customer and revenue metrics at the end of 2021; and (3) sufficiently covered by

ON24’s risk factors. The Court examines each.

First, under Rule 8’s plausibility standard, the

FACCAC must “contain adequate factual allegations

to plausibly infer” that defendants intentionally

24a

misled its potential investors in the lead up to the

IPO. Eclectic Properties East, LLC v. Marcus & Millichap Co., 751 F.3d 990, 994 (9th Cir. 2014). In

Eclectic Properties, the Ninth Circuit upheld a dismissal under Rules 8 and 9. Id. at 995. Plaintiffs there

alleged that defendants sold them property for $30.1

million when the property was in fact only worth

$11.1 million. Id. at 998. The Ninth Circuit found that

plaintiffs there had not pled sufficient factual allegations to demonstrate that defendants had defrauded

or misled them for two reasons. Id. First, plaintiffs’

theory of the case was implausible because it ignored

the more innocent explanation that real estate prices

are variable, which was especially true when coupled

with the fact that “the culminating events that

harmed Plaintiffs took place in the midst of a deep

national recession that seriously affected the real estate market.” Id. Second, plaintiffs alleged that

defendants had initially bought the disputed property

for $20.3 million but then claimed, with no factual

support, that its true market value was only $11.1

million. Id. at 999. Because plaintiffs’ allegations

about the value of the real estate were inconsistent,

the Ninth Circuit struck them.

So too here. The problem with the FACCAC, to

start, is that it is “internally inconsistent” and itself

undermines plaintiff’s theory of the case, rendering it

implausible. See Orellana v. Mayorkas, 6 F.4th 1034,

1043 (9th Cir. 2021) (citing Eclectic Properties, 751

F.3d at 998). The FACCAC is impermissibly inconsistent or vague on three accounts: the estimates of

how many customers churned; when those customers

were alleged to have churned; and whether there was

actual turnover or just churn risk.

25a

Plaintiff’s allegations about how many customers churned in the lead up to the IPO varies wildly.

CW2 initially states that 80% of the customers he acquired during the COVID-pandemic told him they

would not renew. He then turns around and says that

actually 40–50% of his COVID-era customers were a

churn risk, half of what he initially claimed. Later, he

states that he signed up three to five new contracts a

day during the COVID influx, which would mean he

was signing up 60–100 customers in a month in 2020.

This is despite the fact that he initially states he only

had 100–150 customers in 2020. More importantly, of

these new customers, CW2 states that only “several”

a month were churn risks, rather than the 80% (or

even 40–50%) he initially states.

CW7 fares no better. Much like CW2, CW7 initially states that he saw 80% of his atypical, COVIDdriven customers churn. He then states that, out of

his 80–100 accounts, 25–30 churned, which means

that overall he alleges he saw a 30% churn rate, significantly lower than the 80% figure might suggest.

Even this turns out to be inconsistent, however, because CW7 later concludes that only 20% of his

customers were forecast as a high risk of churn for

2021.

CW8 is initially more specific: he states that exactly 43% of his 137 customers were at a risk for

churn. In the very next line, however, he states that

it was actually 50% of his customers that would

churn. He then concludes his testimony by claiming

that, in 2021, he expected that only 30% of his customers would renew, which means that he was

expecting a 70% turnover rate.

26a

It is not clear from the FACCAC when ON24 actually experienced this allegedly significant customer

churn. CW2 states that he noticed “instances” of 40–

50% churn but does not clarify when those instances

occurred or how long they lasted. (Id. ¶ 103.) He also

states that he received an “influx” of atypical, oneyear contracts from March to May and then June to

July of 2020, which means that these accounts would

not be up for renewal until March of 2021 at earliest.

(Id. ¶ 103.) In other words, these customers would not

actually churn until after the February 2021 IPO.

Thus, the Court considers ultimately whether a

known trend was-then established. CW7 states that

75–80% of his atypical customers churned, without

specifying when, but then later states that all of his

2020 contracts would not be renewed until 2021 at

earliest and that in 2021 he only expected a 20%

churn rate. (Id. ¶ 160.) CW8 only worked at ON24

from September 2019 to November 2020, yet suggests

that he knew his atypical accounts would not renew

in the first quarter of 2021.

Moreover, there is too much inconsistency to

demonstrate that ON24 was experiencing actual

churn versus a risk of churn in the lead up to the February 2021 IPO. Again, CW2 states that he noticed

“instances” of actual churn at some unspecified time

but also that 80% of accounts told him they were at a

risk of churn. CW7 stated that 25–30 of his customers

did not renew, again without clarifying when they

cancelled their subscriptions, but also that the great

majority of accounts were one-year contracts that

would not come up until 2021 and only a handful of

customers signed up for six-month deals. He later also

states that only 20% of his customers were marked as

27a

a churn risk in 2021. Finally, CW8 stated that 43–

50% of his accounts were going to churn but also left

in late 2020, well before the February 2021 IPO and

when these accounts would actually come up for renewal.

As in Eclectic Properties, the Court is not required to accept such internally inconsistent and

vague allegations, especially when coupled with the

fact that subscriptions for the types of digital services

ON24 provides are variable and this surge in business

occurred for ON24 in the midst of the historic uncertainty surrounding the COVID-19 pandemic. While

the Court understands that recollections vary and

memories can be imprecise without documents to refresh recollections, the picture painted by plaintiffs’

confidential witnesses at best reflects a “risk” of

churn. According to the confidential witnesses, churn

varied from 20% to 80% of atypical customers. The

FACCAC never attempts to estimate the number of

atypical customers throughout company, though the

confidential witnesses give numbers that range from

25 customers in the year to 60–100 subscribers a

month in 2020. It is not clear, from the testimony,

that any of these customers actually churned in 2020.

In fact, most of the confidential witnesses acknowledged that ON24 signed its COVID-driven, atypical

customers starting in March to July of 2020. (Id. ¶ 22,

103, 176(a).) This is consistent with plaintiff’s theory

of the case—that the atypical, COVID-driven customer influx did not start until March 2020. (Id.

¶ 176(a).) Aside from the “handful” of customers who

signed six-month contracts, the great majority of

these atypical customers then would not have come

up for renewal until after the February 2021 IPO.

28a

This renders at least a part of plaintiffs’ theory of the

case—that by the February 2021 IPO, ON24 was already facing material customer churn—implausible.

Plaintiff initially responds that the confidential

witness testimony establishes that 10% of ON24’s

customer base churned before the IPO. (Citing FACCAC ¶¶ 102–03.) The argument is contradicted by

plaintiff’s own complaint. CW2, in this part of the

FACCAC, states that his team represented 25% of

ON24’s business. (Id. ¶ 102.) He then states that he

noticed “instances” of 40–50% churn “among his

customers,” while clarifying that he signed his oneyear, COVID-driven contracts in March of 2020 at

earliest. (Id. ¶ 103 (emphasis supplied).) Plaintiff multiplies the 40% instances CW2 noticed at some

indeterminate time to the 25% of ON24’s business his

team represented to come up with the claim that 10%

of ON24’s customers churned pre-IPO. CW2, however, neither states that the 40–50% churn occurred

throughout his team (simply within his own customer

base), when the 40–50% churn occurred (just that he

signed up these one-year contracts starting in March

of 2020, which suggests they would not come up until

March 2021 at earliest), and how many customers actually churned (only that there were instances of such

churn).

Plaintiff then argues that the figures presented

by its confidential witnesses are estimates and defendants place too much emphasis on the figures

given. As noted above, some inconsistency, especially

at the motion to dismiss stage, is not dispositive.

Here, however, the level of inconsistency is pervasive

and, thus, decisive. It calls into question plaintiff’s entire case. Plaintiff’s reliance on Glazer Capital

29a

Management, L.P. v. Forescout Technologies, Inc., 63

F.4th 747 (9th Cir. 2021) is for that reason inapt. In

Glazer Capital, defendants took issue with one confidential witness’s estimates not because they were

internally inconsistent but because they argued that

plaintiff had not established his personal knowledge

of them. Id. at 771. The Ninth Circuit disagreed because, given that confidential witness’s title, it was

plausible that he would have the requisite knowledge

even if his “estimates might not be 100% perfect.” Id.

at 772. Glazer Capital says nothing about the type of

internal inconsistencies present in the FACCAC.

Second, inconsistencies aside, plaintiff’s theory

that ON24 was either already experiencing, or knew

it would encounter, material customer churn by its

February 2021 IPO faces an even bigger hurdle—it is

completely contradicted by what actually happened to

ON24 in 2021. According to plaintiff, anywhere from

20–80% of the atypical, COVID-driven customers decided not to renew their one-year contracts,

sometimes as much as six months in advance. ON24,

under this theory, should have seen a noticeable, if

not dramatic, decline in customers by the end of 2021

when these contracts came up for renewal. The opposite is true. ON24’s customer base grew from 1,994

customers in 2020 to 2,122 customers by the end of

2021. (Dkt. No. 105-7 at 3.) Its ARR increased from

$138 million in September 2020 to $171 million by December 2021, a 12% year-over-year increase. (Id. at

2.) These hard figures render plaintiff’s vague allegations of actual churn or churn risk in the lead up to

the February 2021 IPO implausible. They suggest not

that ON24 materially misled investors but instead

that CEO Sharan’s careful, if at times abrasive,

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analysis of churn risk served to convince its customers

not to cancel their subscriptions after one year. Plaintiff’s own complaint is consistent with this more

innocent explanation: Several confidential witnesses

noted that the CEO closely monitored churn risk to

find “potential ways to keep the customer on board”

or have a conversation with a customer on “how to retain their business.” (FACCAC ¶ 154.)

Plaintiff’s reliance on In re Twitter, Inc. Securities Litig., 2020 WL 4187915 (N.D. Cal. Apr. 17, 2020),

does not convince otherwise. There, Judge Tigar ruled

that, even if Twitter accurately reported its user engagement metrics as they existed during an investors’

call, it could not overcome plaintiffs’ securities fraud

claim because it falsely gave the impression that this

trend “has already turned around” when it was in fact

negative. Id. at *9. Judge Tigar clarified that it did

not matter that the numbers Twitter reported at the

time were accurate because plaintiffs were specifically challenging Twitter’s statement that the “trend

has already turned around.” Id. at *10. By failing to

disclose the fact that the actual trend was declining,

Twitter’s positive spin made otherwise accurate statistics misleading. Id. The problem for plaintiff here

is that what ON24’s 2021 metrics demonstrate is not

that they placed a positive spin on a negative trend

but rather that plaintiff has spun an implausibly negative story from an incontrovertibly positive trend.

Third, though plaintiff’s case is explicitly hinged

on the actual churn or churn risk that allegedly existed at the time of the February 2021 IPO, it also

implicitly raises the claim that ON24 misled potential

investors by promising that ON24’s business would

not simply grow post-IPO but continue to grow at the

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same explosive rate. For example, the FACCAC alleges that, by discussing ON24’s success in 2020,

defendants misled potential investors. (FACCAC

¶ 178.) None of the challenged statements, however,

promise that ON24 would continue to acquire customers or grow its revenue at the same pre-IPO rate. As

the Court found in its Previous Order, statements like

“we believe we can achieve significant growth by retaining and further penetrating our existing customer

base,” for example, are not actionable promises without more particularized allegations that the

underlying metrics are deceiving. (Previous Order at

16.) Plaintiff concedes that it is not challenging defendants’ reported 2021 customer base and revenue.

Without such an allegation, these statements do not

amount to a promise that ON24 would sustain its

2020 level of growth.

More importantly, defendants’ detailed disclosures warn of the very risks that plaintiff claims

ON24 failed to disclose. The Risk Factors state:

Our recent revenue growth has been significantly

impacted by an increasing demand for our platform and products following the onset of the

COVID-19 pandemic and resulting precautionary measures. As the impact of COVID-19

lessens, there may be reduced demand for our

platform, and our revenue growth rate may decline.

***

our revenue and revenue growth rate may decline

in future periods compared to 2020 as the impact

of COVID-19 lessens.

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***

Renewals of subscriptions may decline or fluctuate because of several factors, such as

dissatisfaction with our solutions or support, a

customer no longer having a need for our solutions or the perception that competitive products

provide better or less expensive options.

(FACCAC ¶ 181–83.)

Defendants adequately disclosed that, as COVID

cooled, their customer acquisition and rate of growth

might cool as well. This is precisely what ON24’s 2021

metrics demonstrate happened. “Plaintiffs cannot use

the benefit of 20-20 hindsight to turn management’s

business judgment into securities fraud.” Glazier

Capital, 63 F.4th at 782 (quoting In re Worlds of Wonder Sec. Litig., 35 F.3d 1407, 1419 (9th Cir. 1994)).

As alleged, plaintiff’s theory of the case is internally inconsistent, rendered implausible by the

uncontroverted reports of ON24’s growth post-IPO,

and, in any case, covered by ON24’s detailed disclosures. Because the Court previously gave plaintiff

leave to amend, and plaintiff merely restated many of

the same statements without meaningfully engaging

with ON24’s 2021 metrics and risk disclosures, any

further opportunity to amend would be futile. See In

re Fritz Companies Securities Litig., 282 F.Supp.2d

1105, 1109 (N.D. Cal. 2003) (finding that it may be

appropriate to deny leave to amend where the proposed amendment merely restates the same facts

using different language).

For that reason, the motion to dismiss is

GRANTED WITH PREJUDICE.

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RISK FACTORS

The Court incorporates its legal analysis about

the adequacy of risk factors from its Previous Order.

(Previous Order 21–22.) Plaintiff challenges three

risk factors, Statement Nos. 4–6. Again, plaintiff’s

challenge to each of these risk factors is that ON24

knew it faced material customer churn and did not

disclose that information to potential investors. Because the plaintiff has not put forth sufficient facts to

make that theory plausible, its claims against these

risk factors once again fail. For the reasons stated

above, further amendment would be futile.

For that reason, the motion to dismiss on this

ground is GRANTED WITH PREJUDICE.

ITEMS 303 AND 305

The Court set out the standard Items 303 and

105 of SEC Regulations S-K in its Previous Order.

(Previous Order at 24.) Once again, because plaintiff

has not provided sufficient factual support for its

claim that ON24 was experiencing significant customer churn or risk of churn, it has not met its burden

of demonstrating that ON24 violated its duty to disclose under either Item. This is, again for the reasons

stated above, not a defect that can be solved by

amendment.

For that reason, the Court GRANTS the motion to

dismiss as to these Items WITH PREJUDICE.

SECTION 15

Because plaintiff has not stated a primary claim

under Section 11, its Section 15 claim also fails. In re

Wells Fargo Mortgage-Backed Certificates Litig., 712

F.Supp.2d 958, 969 (N.D. Cal. 2010) (internal citation

34a

omitted). The Court therefore GRANTS the motion to

dismiss WITH PREJUDICE on this claim.

IV. CONCLUSION

For the reasons stated above, Underwriter Defendants’ motion for joinder is GRANTED. Defendants’

motion to dismiss is GRANTED WITH PREJUDICE.

Plaintiff has once again failed to put forth a sufficient

factual foundation for its central theory of omission—

that ON24 knew it faced material customer churn at

the time of its IPO and omitted to tell its potential

investors. Because plaintiff was previously given

leave to amend and has failed to add anything other

than internally inconsistent and conclusory facts in

support, further amendment would be futile.

This terminates Dkt. Nos. 105 and 106.

The clerk of the court shall close the action.

IT IS SO ORDERED.

Date: March 5, 2024

/s/ Yvonne Gonzalez Rogers

YVONNE GONZALEZ ROGERS

United States District

Court Judge

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APPENDIX C

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

IN RE ON24, INC.

SECURITIES LITIGATION

Case No.:

4:21-cv-8578-YGR

ORDER GRANTING

THE MOTION TO

DISMISS

ORDER GRANTING

THE MOTION FOR

JOINDER

Re: Dkt. Nos. 83

and 85

Lead plaintiff Leadersel Innotech ESG brings

this putative class action against ON24, Inc. (“Corporate Defendant”), Sharat Sharan, Steven Vattuone,

Irwin Federman, Denise Persson, Holger Staude,

Dominique Trempont, Barry Zwarenstein (together,

“Individual Defendants”), and Goldman Sachs & Co.

LLC, J.P. Morgan Securities LLC, KeyBanc Capital

Markets Inc., Robert W. Baird & Co. Incorporated,

Canaccord Genuity LLC, Needham & Company, LLC,

Piper Sandler & Co., and William Blair & Company,

L.L.C (together, “Underwriter Defendants”). Corporate Defendant, Individual Defendants, and

Underwriter Defendants are collectively referred to

as defendants.

In summary, the Consolidated Class Action

Complaint (Dkt. No. 80, “CCAC”) alleges violations of

the Securities Act of 1933 (“Securities Act”) in

36a

connection with the initial public offering (“IPO”) of

ON24 which is a cloud-based digital experience platform that enables businesses to convert customer

engagement into revenue through interactive webinars, virtual events, and multimedia content

experiences. (CCAC ¶ 26.) The CCAC challenges thirteen statements made in the registration statement

and prospectus issued in advance of ON24’s IPO.

Plaintiff alleges that defendants did not disclose how

a changed business strategy led them to recruit shortterm subscribers in the lead-up to the IPO to the detriment of initial investors post-IPO. The CCAC

contains strict liability and negligence claims under

Section 11 of the Securities Act and violations of Section 15 of the Securities Act and Items 105 and 303 of

Regulation S-K of the Securities and Exchange Commission (“SEC”).

Defendants move to dismiss on the grounds that

(i) none of the statements are materially false or misleading and (ii) without a primary violation of Section

11, the Section 15 claim must also fail. (Dkt. No. 83,

“MTD.”)1 In addition, Underwriter Defendants seek

1 Defendants have also filed a request for judicial notice

and present eight documents in support thereof. (Dkt. No. 84.)

For each, defendants request either judicial notice or incorporation of the document by reference. Plaintiff generally does not

oppose this request. (Dkt. No. 86, “Opp.” at 8.) To the extent the

request is granted, the Court does not take judicial notice for the

truth asserted within the documents. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). Judicial notice is

appropriate for “adjudicative fact[s]” that “can be accurately and

readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(a)–(b). The request

includes notice of eight exhibits: (1) ON24’s Registration Statement, filed with the SEC on January 8, 2021, and amended on

37a

to join the motion to dismiss (Dkt. No. 85). Having

carefully considered the papers submitted, the pleadings in this action, the argument presented at the

March 27, 2023, hearing, and for the reasons set forth

below, the Court hereby GRANTS both Underwriter

Defendants’ joinder motion and defendants’ motion to

dismiss with leave to amend.

BACKGROUND

FACTUAL BACKGROUND

The CCAC and judicially-noticed documents allege as follows:

ON24 is a corporation headquartered in San

Francisco, California that provides a cloud-based digital experience platform for interactive webinars,

virtual events, and multimedia content experiences.

(CCAC ¶ 26.) Founded in 1998 by co-founder and CEO

Sharat Sharan, ON24 helps companies turn customer

engagement into revenue by turning end-user data

into buying signals and behavioral insights. (Id. ¶ 53.)

The corporation derives its revenue from subscriptions to its various products. (Id. ¶¶ 53, 56.) As a

subscription-based company, ON24 must attract new

January 25, 2021; (2) ON24’s Prospectus, filed on February 4,

2021; (3) ON24’s March 17, 2021, Form 8-K; (4) ON24’s May 12,

2021, Form 8-K; (5) ON24’s August 10, 2021, Form 8-K; (6)

ON24’s November 9, 2021, Form 8-K; (7) ON24’s February 28,

2022, Form 8-K; and (8) ON24’s March 14, 2022, Form 10-K. Judicial notice of SEC filings is appropriate. Metzler Inv. GMBH v.

Corinthian Colls., Inc., 540 F.3d 1049, 1064 n.7 (9th Cir. 2008).

Moreover, the CCAC incorporates by reference Exhibits 1, 2, 6,

and 7. See Khoja, 899 F.3d at 1002 (holding that a court may

consider a document incorporated if the complaint necessarily

relies on it and no party questions its authenticity).

38a

customers or upsell existing customers by selling

them new subscriptions. (Id. ¶ 56.) The subscription

agreements are primarily annual and billed in advance. (Id. ¶ 57.)

With the onset of the COVID-pandemic and the

increased need for cloud-based platforms to conduct

virtual meetings, ON24 experienced explosive

growth. (Id. ¶¶ 7, 59.) ON24 told investors this was

“partly in response to the COVID-19 pandemic.” (Id.

¶ 66.) For example, in the nine months after September 30, 2020, ON24’s revenue increased by 59% as

compared to the year before. (Id. ¶ 60.) Its customer

base increased from 760 customers as of December 31,

2015, to over 1,900 customers as of September 30,

2020. (Id. ¶ 61.) Annual recurring revenue (“ARR”)—

which is driven by ON24’s ability to acquire new customers and to maintain and expand its relationship

with existing ones—grew similarly, with $61.2 million ARR reported as of December 31, 2018, to $138.9

million as of September 30, 2020. (Id. ¶ 63.) Finally,

during the pandemic ON24’s net retention rate

(“NRR”)—which reflects ON24’s recurring revenue

from existing customers—also grew. (Id. ¶ 64.)

In the three quarters preceding the IPO—the

quarters ending on June 30, 2020, September 30,

2020 and December 31, 2020—ON24 changed its

business model. (Id. ¶ 9.) ON24 began to enroll new

customers that were atypical. Many were small- to

medium-sized businesses (“SMB”) or otherwise atypical customers that wanted to use ON24’s platform for

one-time events. (Id. ¶ 9.) These “quick fixes” still required one-year subscriptions. (Id. ¶ 114.)

39a

Five former employees, set out here as confidential witnesses, describe how ON24 started to pursue

new customers. (Id. ¶ 72.) The employees explain that

there were monthly calls, attended regularly by the

Individual Defendants, to discuss customer acquisition and retention. (Id. ¶¶ 84–85.) One employee

“recalled that during the COVID-19 pandemic, ON24

signed up anybody and everybody regardless [of

whether] they were considered to be a good customer

for the Company.” (Id. ¶ 88.) Internal pressure “to

meet quotas in the face of increased pressure and declining demand” existed. (Id. ¶ 113.) Much of this

pressure was “centered around” the company going

public. (Id. ¶ 138.)

Employees were required to track clients’ expectation for renewal, a metric internally known as

“churn.” (Id. ¶ 92.) Once the COVID-19 pandemic restrictions began to ease, one employee stated that

there was a “dramatic decline in demand.” (Id. ¶ 98.)

Employees noticed high churn among customers because ON24 was a pandemic purchase. (Id. ¶ 100.) In

this regard, ON24 experienced customer-churn in

three ways: clients were using ON24’s products only

as a temporary solution; customers were not renewing

one-time purchases; and customers were electing to

“down sell,” or remove features from their subscription. (Id. ¶ 101.) One employee recalled that

customers would tell him as much as six months in

advance that they planned to cancel their subscriptions. (Id. ¶ 102.) Before the IPO, during the winter of

2020, demand “really dropped off” because of “market

saturation” and “uncertainty regarding COVID-19.”

(Id. ¶ 125.) ON24 had already known, before COVID19 hit, that SMB customers had high churn but the

40a

pandemic “amplified things.” (Id. ¶ 106.) The concerns

with customer turnover were discussed at the

monthly meeting with the Individual Defendants. (Id.

¶ 103.) Defendant Sharan closely monitored the performance of the sales team. (Id. ¶ 141.)

On February 3, 2021, ON24 conducted its IPO,

in which it sold 8,560,930 shares of common stock to

the public at $50.00 a share. (Id. ¶ 67.) The IPO was

conducted pursuant to, and the sale of ON24 stock

was solicited by, several documents that were filed by

ON24 and the Underwriter Defendants with the SEC,

including (i) a January 8, 2021, registration statement with a January 25, 2021, amendment, which

was declared effective by the SEC on February 2, 2021

(the “Registration Statement”) and (ii) a February 4,

2021, final prospectus (the “Prospectus” and, together

with the Registration Statement, the “Offering Documents”). (Id. ¶ 69.)

CHALLENGED STATEMENTS

Plaintiff challenges thirteen statements contained in the Offering Documents as misleading.

Specifically, they read:

Statement 1 (id. ¶ 144)2:

As of September 30, 2020, we had over

1,900 customers in more than 40 countries,

including three of the five largest global

technology companies, four of the five largest U.S. banks, three of the five largest U.S.

banks, three of the five largest global

2 All emphasis shown is original to the CCAC. Plaintiff

notes it only challenges the emphasized portions of the statements; the rest is provided for context.

41a

healthcare companies and three of the five

largest global industrial and manufacturing

companies, in each case measured by 2019

revenue. No single customer contributed

more than 5% of our total revenue for the

year ended December 31, 2019 or for the

nine months ended September 30, 2020. We

have a highly engaged and loyal customer base that has allowed us to grow

our revenue with them over time, and

achieve an NRR of 147% as of September

30, 2020. Our NRR was 107% and 108% as

of December 31, 2018 and December 31,

2019, respectively.

Statement 2 (id. ¶ 145):

Growing base of customers across verticals. We have a large and diverse set of

customers across a broad set of industries. We have grown our customer base

from approximately 760 customers as of

December 31, 2015 to over 1,900 customers in more than 40 countries as of

September 30, 2020, including three of the

five largest global technology companies,

four of the five largest U.S. banks, three of

the five largest global industrial manufacturing companies, in each case measured by

2019 revenue. We intend to leverage our

land and expand model to further penetrate customers across these verticals.

Statement 3 (Id. ¶ 146):

Key Factors Affecting Our Performance

42a

***

Annual Recurring Revenue

We believe that ARR is a key metric to

measure our business because it is driven

by our ability to acquire new subscription

customers and to maintain and expand our

relationship with existing subscription contracts as of the measurement date,

including existing customers with expired

contracts that we expect to be renewed. Our

ARR amounts exclude professional services,

overages from subscription customers and

Legacy revenue. Our ARR was $61.2 million

as of December 31, 2018, $63.6 million as of

March 31, 2019, $67.2 million as of June 30,

2019, $70.0 million as of September 30,

2019, $76.9 million as of December 31, 2019,

$85.9 million as of March 31, 2020, $114.2

million as of June 30, 2020, and $138.9 million as of September 30, 2020. Our

consistent ARR growth each quarter reflects our success in acquiring new

customers and expanding subscriptions with existing customers, which

was occurring prior to the COVID-19

pandemic and has accelerated in 2020

partly in response to the COVID-19 pandemic.

Statement 4 (id. ¶ 149):

Our Growth Strategy

43a

We intend to drive the growth of our business and the adoption of our solutions by

executing the following strategies:

•

Expand within existing customers. We

believe we can achieve significant organic

growth

expanding

penetration of our existing customer

base. Our land and expand model

drives expansion of new subscriptions within our existing customer

base by selling subscriptions to additional

parts

existing

customers’ organizations, expanding into new regional divisions and

upselling new solutions. In addition,

we are developing new applications for

our platform, including partners training and employee recruiting and forms

of indirect marketing, such as education,

enrollment

and

benefits

programs.

Statement 5 (id. ¶ 150):

Businesses today primarily use automated

solutions, such as digital advertising and

email, for marketing. While these automated solutions reach large numbers of

prospective customers, they have generally

failed to deepen customer engagement because they were designed with the simple

purpose of pushing marketing messages in

one direction—from the business to the prospective customer. For businesses to

succeed, we believe their sales and

44a

marketing strategies must evolve from the

era of automation to the era of engagement.

Our platform provides an innovative way

both to scale the digital marketing and

deepen prospective customer engagement.

We believe our opportunity to help businesses convert digital engagement into

revenue will continue to grow as industries modernize their sales and

marketing processes, which has been

accelerated by the COVID-19 pandemic.

Statement 6 (id. ¶ 151):

The terms of our subscription agreements

are primarily annual and, to a lesser extent,

multi-year. We bill for the full term in advance or on an annual or monthly basis,

depending on the terms of the agreement.

We recognize subscription revenue ratably

over the term of the subscription period beginning with the date customers are

granted access to our platform. Our contracts typically require payments in annual

installments. We have seen an increase

in the proportion of multi-year subscriptions as the number of larger

customers has increased. Customers

with multi-year subscription agreements

accounted for 21% and 27% of ARR as of December 31, 2018 and September 30, 2020,

respectively. See “—Key Business Metrics—Annual Recurring Revenue” for

further information regarding how we calculate ARR.

45a

Statement 7 (id. ¶ 152):

We intend to continue to focus on the acquisition of new customers with 2,000 or

more employees, or Enterprise customers, and to expand the usage of our

platform within these larger accounts.

We follow a named account coverage approach with aligned account teams,

including sales, account management and

customer success. After establishing a customer relationship with a business unit of

an Enterprise, we seek to expand to new

business units, divisions, departments and

geographic regions, as well as increase subscriptions to additional products, which we

refer to as “attachments,” and expand product use cases.

Statement 8 (id. ¶ 153):

We believe we can achieve significant

growth by retaining and further penetrating our existing customer base with

the addition of new users and new products, and through upsell and cross sell.

Our multi-dimensional land and expand

model drives onboarding and allows us to

acquire customers via free trials, live demos

and continuous engagement with an efficient sales and marketing investment. As

we continue to drive more actionable revenue generating marketing insights, we

believe that we have a significant opportunity to further increase sales among

existing customers across different

46a

functional and geographic departments

within

each

respective

organization. Our ability to pursue this

opportunity will require us to scale our sales

and marketing organizations and otherwise

increase our operating expenses, and we

may not be successful on the timetable we

anticipate, or at all, for any number of reasons, which may cause our results to vary

from period to period.

Statement 9 (id. ¶ 157):

Investing in our common stock involves

risks, which are discussed more fully under

“Risk Factors.” You should carefully consider all the information in the prospectus,

including under “Risk Factors,” before making an investment decision. These risks

include, but are not limited to, risks relating to:

•

Our ability to sustain our recent

growth rate in the future, attract

new customers and expand sales to

existing customers;

•

Fluctuation in our performance,

our history of net losses and expected increases in our expenses;

•

Competition and technological development in our markets and any

decline in demand for our solutions or generally in our markets;

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•

Our ability to expand our sales and

marketing capabilities and otherwise manage our growth;

•

The impact of the COVID-19 pandemic.

Statement 10 (id. ¶ 158):

We may not be able to sustain our recent

revenue growth rate in the future.

For the year ended December 31, 2019, our

revenue increased by 8% as compared to the

year ended December 31, 2018. We have experienced significant revenue growth

during 2020, with our revenue increasing by

59% for the nine months ended September

30, 2020 as compared to the nine months

ended September 30, 2019. Our recent revenue growth has been significantly

impacted by an increasing demand for

our platform and products following

the onset of the COVID-19 pandemic

and resulting precautionary measures.

As the impact of COVID-19 lessens,

there may be reduced demand for our

platform, and our revenue growth rate

may decline. If these new customers

elect not to continue their subscriptions

as the impact of COVID-19 lessens, our

business, financial condition and results of operations would be harmed.

Statement 11 (id. ¶ 159):

Our quarterly results may fluctuate significantly and may not fully reflect the

48a

underlying performance of our business.

Our quarterly results of operations and financial condition may vary significantly in

the future, and period-to-period comparisons may not be meaningful. Accordingly,

the results of any one quarter should not be

relied upon as an indication of future performance. Our quarterly results of

operations and financial condition may fluctuate as a result of a variety of factors,

many of which are outside of our control and

may not fully reflect the underlying performance of our business. For example, our

revenue and revenue growth rate may

decline in future periods compared to

2020 as the impact of COVID-19 lessens.

Further, because we generally invoice our

customers at the beginning of the contractual terms of their subscriptions to our

solutions, our financial condition reflects

deferred revenue that we recognize ratably

as revenue over the contractual term. If

fewer new enrollments or renewals occur as the impact of COVID-19 lessens,

our cash and deferred revenue as of future dates may decrease. Fluctuation in

quarterly results may negatively impact the

value of our securities. Factors that may

cause fluctuations in our quarterly results or operations include:

•

Our ability to retain and expand

customer usage;

49a

•

Our ability to attract new customers.

Statement 12 (id. ¶ 160)

Failure to attract new customers or retain, expand the usage of, and upsell

our products to existing customers

would harm our business and growth

prospects.

We derive, and expect to continue to derive,

a significant portion of our revenue and

cash flows from sales of subscriptions to our

products. As such, our business depends on

our ability to attract new customers and to

maintain and expand our relationships with

our existing customers, including by expanding their usage and upselling

additional solutions. Our business is largely

subscription-based, and customers are not

obligated to and may not renew their subscriptions after their existing subscriptions

expire. As a result, customers may not

renew their subscriptions at the same

rate, increase their usage of our solutions or purchase subscriptions for

additional solutions, if they renew at

all. Renewals of subscriptions may decline or fluctuate because of several

factors, such as dissatisfaction with

our solutions or support, a customer no

longer having a need for our solutions

or the perception that competitive products provide better or less expensive

options. In order to grow our business, we

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must continually add new customers and

replace customers who choose not to continue to use our platform. Any decrease in

user satisfaction with our solutions or support may result in negative online customer

reviews and decreased word-of-mouth referrals, which would harm our brand and our

ability to grow.

In addition to striving to attract new

customers to our platform, we seek to

expand the usage of our solutions by

our existing customers by increasing

the number of departments, divisions

and teams that use our solutions within

each of our customers. If we fail to expand the usage of our solutions by

existing customers or if customers fail

to purchase other solutions from us, our

business, financial condition and results of operations would be harmed.

Statement 13 (id. ¶ 161):

Our results of operations may be adversely impacted by the COVID-19

pandemic.

[T]he economic impacts of COVID-19

have affected and may continue to affect customer and prospective customer

spending on technology such as ours,

particularly for businesses involving

in-person interactions, such as hospitality, manufacturing and professional

services businesses. These customers

may experience reduced revenue and

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revised budgets, which may adversely

affect our customers’ ability or willingness to purchase subscriptions to our

platform, the timing of subscriptions,

customer retention, and the value or

duration of subscriptions, all of which

could adversely affect our operating results.

***

Due to our subscription-based business

model, the effect of the COVID-19 pandemic may not fully be reflected in our

results of operations until future periods. In addition, uncertainty regarding

the impact of COVID-19 on our future

operating results and financial condition may result in our taking costcutting measures, reducing the level of

our capital investments and delaying

or canceling the implementation of

strategic initiatives, any of which may

negatively impact our business and reputation. The global macroeconomic

effects of the COVID-19 pandemic and

related impacts on our customers’ business operations and their demand for

our solutions may persist for an indefinite period, even after the COVID-19

pandemic has subsided.

Of the thirteen statements, the first eight were made

in the registration statement and the last four in the

prospectus.

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Importantly, plaintiff does not allege that these

statements were misleading in their own right. Instead, plaintiff alleges the challenged statements

were misleading when made because they:

failed to disclose and misrepresented the

following significant, then-existing material

events, trends, and uncertainties that

ON24 had already been facing at the time of

the IPO: (i) ON24 signed up new customers

for 1-year contracts during the second,

third, and fourth quarters of 2020 that

planned either to not renew or downsell, a

larger-than-typical percentage of which

were [SMB] customers, nonideal customers

focused on one-time events, and one-time

use cases that planned either not to renew

or downsell; and (ii) given declining demand

and the magnitude of new, 1-year customers that ON24 signed up during the second,

third, and fourth quarters of 2020 that were

either not renewing or were going to downsell, ON24 already faced material customer

churn and downselling at the time of the

IPO.

(Id. ¶ 147.)

EVENTS FOLLOWING THE IPO

After ON24’s IPO, the company reported lower

than expected revenues. (Id. ¶ 164.) Just six months

after the IPO, Sharan admitted that ON24 had experienced “higher-than-expected churn and downsell

from customers” signed up during the peak of the

COVID-19 pandemic, many of which came from “the

first-time renewal cohort.” (Id. ¶ 165.) This disclosure

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caused market analysts to downgrade ON24’s stock.

(Id. ¶ 170.) Analysts at underwriter defendant JP

Morgan, for example, lowered the common stock’s

price target from $85.00 to $32.00 per share. (Id.) In

its report, JP Morgan explained that the “major issue

is the increase in churn and [customer] down-sell that

will likely cause the platform revenue to decelerate.”

(Id.) Analysts stressed that the problem was that

“[m]anagement’s previous guidance had not factored

in enough churn from smaller accounts.” (Id.) One underwriter defendant, Canaccord, downgraded ON24’s

common stock from “buy” to “hold” because of “elevated churn” from “first-time renewals who had

signed up for one-year deals at the height of COVID.”

(Id. ¶ 172.) This was ON24’s “largest renewal cohort

ever,” but Canaccord emphasized that the cohort was

mostly made up of clients who were “not normally

ON24’s target customer.” (Id. ¶¶ 172–73.) By November 10, 2021, JP Morgan noted that ON24’s ARR for

the fourth quarter of 2021 was “negatively impacted”

by the continued churn of first-time customers acquired during the COVID-19 pandemic in the lead up

to ON24’s IPO. (Id. ¶ 182.) Another underwriter defendant, Piper Sandler, stated that though ON24’s

ARR had had continued to grow in 2021, “eroding customer renewal rates and contract downsizing over the

last two quarters has pressured ARR growth to moderate meaningfully.” (Id. ¶ 185.) Almost a year after

its IPO, Sharan reflected that the “largest challenge

in 2021 was the first time renewal cohort.” (Id. ¶ 191.)

More to the point, the CEO said that “churn has been

[ON24’s] biggest issue.” (Id. ¶ 194.)

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The value of ON24 common stock fell from

$50.00 when the company went public to $12.05 at the

time the CCAC was filed, a 76% decline. (Id. ¶ 204.)

II.

LEGAL FRAMEWORK

RULE 8

To survive a Rule 12(b)(6) motion to dismiss, a

complaint must contain sufficient factual matter, accepted as true, to “state a claim for relief that is

plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009). The requirement that the court must “accept as true” all allegations in the complaint is

“inapplicable to legal conclusions.” Id. “Threadbare

recitals of the elements of a cause of action, supported

by mere conclusory statements, do not suffice.” Id.

The parties do not dispute that Fed. R. Civ. P. 8(a)

applies.3 The Court therefore analyzes the complaint

under a plausibility, not particularity, standard. Even

without Fed. R. Civ. P. 9(b), however, plaintiff must

still plead sufficient facts to state a plausible claim.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

III. ANALYSIS

JOINDER

The Underwriter Defendants seek to join ON24

and the Individual Defendants’ motion to dismiss.

3 Though Section 11 does not have a fraud element, the

particularity requirements of Rule 9(b) may still apply to a Section 11 claim that sounds in fraud. In re Daou Systems, Inc., 411

F.3d 1006, 1027 (9th Cir. 2005). Here, the CCAC states that

“[t]his cause of action does not sound in fraud.” (CCAC ¶ 213.)

Defendants do not object to this characterization.

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(Dkt. No. 85.) Plaintiff does not oppose joinder. The

Court therefore GRANTS the joinder motion.

SECTION 11

Plaintiff alleges that all thirteen statements at

issue were materially misleading for the same reason.

ON24 failed to disclose that in the three quarters

leading up to the IPO, ON24 relaxed its qualification

criteria to enroll new, 1-year customers that it knew

planned either not to renew or to downsell and, given

declining demand and the magnitude of these onetime purchases, ON24 was already facing material

customer churn at the time of IPO that inevitably led

to investor losses. By omitting this information, plaintiff continues, defendants’ risk disclosures did not

fulfill Items 303 and 105.

In their motion to dismiss, defendants challenge

the sufficiency of plaintiff’s Section 11 claim for various reasons, namely, that some of the challenged

statements are (1) “expressions of corporate optimism”; (2) forward-looking statements protected by

the bespeaks-caution doctrine; and (3) none of the

challenged statements were misleading when made.

Defendants also generally argue that plaintiff’s

claims fail because they are made up of legal conclusions instead of well-pled facts. The Court starts with

this final argument first. To effectively address the

rest, the Court sorts the challenged statements into

headings based on defendants’ arguments for dismissal.

Conclusory Allegations

Defendants argue plaintiff’s claims should be

dismissed because they consist of legal conclusions

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unsupported by factual allegations. Plaintiff responds

it sufficiently alleged that ON24 failed to disclose

that, at the time of the IPO, ON24 faced material customer churn. In support, plaintiff points to the

statements made by its five confidential witnesses.

To state a claim under Section 11, a plaintiff

must prove that (1) the Offering Documents contained

an omission or misrepresentation, and (2) that the

omission or misrepresentation was material, that is,

it would have misled a reasonable investor about the

nature of his or her investment. Rubke v. Capitol Bancorp, Ltd., 551 F.3d 1156, 1161 (9th Cir. 2009)

(cleaned up). Not all adverse events must be disclosed.

“Disclosure is required [by the Securities Act] only

when necessary to make statements made, in the

light of the circumstances under which they were

made, not misleading.” Matrixx, 563 U.S. at 44

(cleaned up). Omissions, therefore, are actionable

only when what is omitted renders what is included

misleading. See Omnicare, Inc. v. Laborers Dist.

Council Constr. Indus., 575 U.S. 175, 179 (2015)

(“Section 11 thus creates two ways to hold issuers liable for the contents of a registration statement—one

focusing on what the statement says and the other on

what it leaves out.”) When “a plaintiff relies on a theory of omission, the plaintiff must allege ‘facts going

to the basis for the issuer’s opinion . . . whose omission

makes the opinion statement at issue misleading to a

reasonable person reading the statement fairly and in

context.’” City of Dearborn Heights Act 345 Police &

Fire Ret. Sys. v. Align Tech., Inc., 856 F.3d 605, 616

(9th Cir. 2017) (citing Omnicare, 575 U.S. at 1332).

The Court agrees that plaintiff’s theory of omission, the crux of why it believes all thirteen

57a

statements are misleading, is not supported by sufficient facts. Plaintiff alleges that (1) the Offering

Documents omitted to tell potential investors that

ON24 had changed its business strategy to pursue

one-time, atypical customers; and (2) this omission

was material because the resulting customer churn

was material. About customer churn, confidential witnesses say: “that the Company knew a lot of the

COVID business was not going to stick” (CCAC ¶ 79);

“there were open discussions during meetings and

within the Company that the small business cohort

did not have good retention rates” (id. ¶ 86); “the

churn who signed on during the pandemic was a concern from an account management perspective” (id.

¶ 96); “Defendant Sharan not only misled investors,

but also employees about the sustainability of ON24’s

performance . . . ON24’s success was characterized as

a success in itself and not something dependent on the

circumstances of the pandemic . . . [an] increase in

quotas were instituted despite a dramatic decline in

demand once lockdown restrictions had begun to relax” (id. ¶ 98); one confidential witness said “there

were instances that he would notice 40-50% churn

among his customers” (id. ¶ 100); another stated that

“churn was occurring in several ways . . . this represented a huge downturn” and “customers inform[ed]

him as much as six months in advance, during 2020

and 2021, that they were not going to renew their contracts” (id. ¶¶ 101–02); “the Company was already

aware there was high churn amongst the SMB customers prior to the pandemic, but the pandemic

amplified things” (id. ¶ 106); “there was a lot of new

business in the first few months of the pandemic,

which then leveled out shortly before and after the

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Company’s IPO” (id. ¶ 107); “the Company expected

more from the sales team despite the declining demand, failing to adjust to the changes from the

beginning of the pandemic” (id. ¶ 121); “after a lot of

early success, things really dropped off and demand

declined during November/December 2020” (id.

¶ 125); and “when account executives saw what was

happening regarding demand . . . [salespersons] informed them that opportunities were no longer

coming in like they were previously” (id. ¶ 143).

These statements, taken as true, demonstrate

that ON24 lost some customers in the lead up to the

IPO. They do not establish, however, that ON24 faced

material customer churn at the time the statements

were made. Twenty-twenty vision does not apply.

Even taking all inferences in favor of plaintiff at this

stage, none of the confidential witnesses provide a factual foundation for its theory that demand for ON24’s

products declined to the point that omitting that information materially misled investors at the time.

Statements like there was “high churn,” a “dramatic

decline in demand” and “things really dropped off”

are, without some quantification to put them into context, bald allegations. For example, plaintiff does not

allege that defendants knew that, out of ON24’s 1,900

customers, 40-50% planned to downsell or not renew.

Instead, plaintiff alleges that one confidential witness

said that there were “instances” where he would notice a “40-50%” churn of his customers. It is unclear

from the CCAC how many customers this one confidential witness had or how many times he saw this

degree of churn. Without more, the Court cannot determine whether the fact that ON24 omitted to tell

59a

investors about customer churn was materially misleading.

Because plaintiff’s CCAC hinges on the significance of customer churn, the lack of a factual

foundation is fatal. The Court therefore GRANTS defendants’ motion to dismiss with leave to amend. To

avoid unnecessary motions practice, however, the

Court addresses the rest of defendants’ arguments.

Corporate Optimism and Puffery

Defendants argue that Statement Nos. 1, 3, and

8 are nonactionable because they are “no more than

subjective expressions of optimism” and puffery.

Plaintiff disagrees, asserting that when properly put

in context, the statements “conveyed verifiable information about the then-current state of ON24’s

existing business which was incomplete and misleading in context.”

An actionable statement must be “capable of objective verification.” Retail Wholesale & Dep’t Store

Union Local 338 Ret. Fund v. Hewlett-Packard Co.,

845 F.3d 1268, 1275 (9th Cir. 2017). “[V]ague, generalized assertions of corporate optimism or statements

of ‘mere puffing’ are not actionable material misrepresentations under federal securities laws because no

reasonable investor would rely on such statements.”

In re Restoration Robotics, Inc. Sec. Litig., 417 F.

Supp. 3d 1242, 1255 (N.D. Cal. 2019) (cleaned up).

“When valuing corporations . . . investors do not rely

on vague statements of optimism like ‘good,’ ‘well-regarded,’ or other feel-good monikers. This mildly

optimistic, subjective assessment hardly amounts to

a securities violation.” In re Cutera Sec. Litig., 610

F.3d 1103, 1111 (9th Cir. 2010).

60a

Statement No. 1. Without more specific allegations, this statement amounts to no more than

puffery. Defendants stated that they had “more than

1,900 customers” who are “highly engaged and loyal.”

(CCAC ¶ 144.) Plaintiff argues that this statement

was misleading because it failed to warn investors

that a significant number of customers were, in fact,

planning to unsubscribe or downsell. The CCAC does

not quantify this churn. Alone, this Court has found

that descriptive statements like customers are

“highly engaged” and “loyal” are not actionable.

In re Nimble Storage, Inc. Securities Litig. is instructive. There, plaintiff alleged that defendants

knew they were “not effectively penetrating the enterprise segment but concealed this fact by touting the

growth of its enterprise customer base while at the

same time relabeling commercial accounts as enterprise accounts.” 252 F. Supp. 3d 848, 852 (N.D. Cal.

2017). Defendants stated their customer base had increased by 140 clients throughout the class period. Id.

Plaintiff presented no particularized evidence that

defendants had misrepresented the number of clients.

Id. Rather, plaintiff alleged that defendants’ statement that it added enterprise clients at a “record

pace” was misleading. Id. This Court found that, absent more particularized allegations that sales data

was misreported, such “generally optimistic statements” were not actionable. Id. (internal citation

omitted). Similarly here, without more particularized

allegations, statements like ON24’s 1,900 customers

are “highly engaged and loyal” are incapable of objective verification.

Statement No. 3. This statement is inactionable

for much the same reasons as Statement No. 1.

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Defendants state that their “consistent ARR growth

each quarter reflects our success in acquiring new

customers and expanding subscriptions with existing

customers, which was occurring prior to the COVID19 pandemic and has accelerated in 2020 partly in response to the COVID-19 pandemic.” (CCAC ¶ 146.)

Judicially-noticed documents demonstrate that this

statement is accurate: defendants reported that ARR

increased quarter after quarter, including the quarter

after the IPO. Plaintiff actually acknowledges this

growth, pre-IPO, in their CCAC and notes that ON24

said the growth was “partly in response to the

COVID-19 pandemic.” (Id. ¶¶ 63, 66.) Plaintiff argues

this metric is misleading but, without more, it is unclear why. Investors can read such numbers and

accompanying cautionary language telling them that

this was in part due to the COVID-19 pandemic, and

judge for themselves the risks. See In re Nimble Storage, 252 F. Supp. 3d at 853–54 (noting that, sales and

profit data, when accurately reported, are rarely subject to misinterpretation even when accompanied by

generally optimistic statements (cleaned up)). This is

especially true because, in the risk factors, defendants

stressed that subscriptions and revenue could decrease as the impact of the COVID-19 pandemic

lessened. (CCAC ¶ 159.)

Statement No. 8. Without more particularized

allegations, the Court also finds that Statement No. 8

is inactionable as a subjective, feel-good statement.

Defendants state that they “believe they can achieve

significant growth by retaining and further penetrating our existing customer base” and they have a

“significant opportunity to further increase sales

among existing customers.” (CCAC ¶ 153.)

62a

Statements like “significant opportunity” and “significant growth” are, as alleged, too vague to be

actionable. See, e.g., Police Retirement Sys. of St.

Louis v. Intuitive Surgical, Inc., 759 F.3d 1051, 1060

(N.D. Cal. 2014) (finding that statements like an opportunity is “still very, very large” are corporate

puffery). Unless plaintiff can provide further factual

foundation for its theory that customer churn was material, such generally optimistic statements appear to

be puffery.

Plaintiff’s reliance on this Court’s decision in In

re Apple Sec. Litig. is unavailing. There, Apple reported that its new iPhone “got off to a really great

start” a few days before it shut down its production

line entirely because it was doing so poorly. No. 19-cv2033-YGR, 2020 WL 2857397, at *15 (N.D. Cal. June

2, 2020). With such evidence in mind, this Court admonished Apple that it could not “affirmatively create

a positive impression of an area it knows to be doing

poorly.” Id. Plaintiff does not provide nearly this level

of factual support for its claims. This admonishment

is therefore inapplicable.

The Court therefore GRANTS defendants’ motion

to dismiss as to Statement Nos. 1, 3 and 8 on the

grounds of puffery with leave to amend.

Bespeaks Caution Doctrine

Defendants argue that Statement Nos. 2, 5 and

7 are protected by the bespeaks caution doctrine.

Plaintiff responds that those three statements “were

rendered misleading by omission of historical facts

and are, therefore, not protected.”

63a

The bespeaks caution doctrine “provides a mechanism by which a court can rule as a matter of law . . .

that defendants’ forward-looking representations contained enough cautionary language or risk disclosure

to protect the defendant against claims of securities

fraud.” In re Atossa Genetics Inc. Sec. Litig., 868 F.3d

784, 798 (9th Cir. 2017) (internal citation and quotations omitted). A dismissal on the pleadings based on

the bespeaks caution doctrine is justified only by a

“stringent” showing that “reasonable minds could not

disagree that the challenged statements were not

misleading.” Livid Holdings Ltd. v. Salomon Smith

Barney, Inc., 416 F.3d 940, 947 (9th Cir. 2005) (internal citation and quotations omitted). The bespeaks

caution doctrine applies only when “the truth or falsity of the statement cannot be discerned until some

point in time after the statement is made.” Mallen v.

Alphatec Holdings, Inc., 861 F.Supp.2d 1111, 1126

(S.D. Cal. 2012).

Statement No. 2. This statement is forwardlooking. Defendants state they have “a large and diverse set of customers across a broad set of industries

. . . [and they] intend to leverage [their] land and expand model to further penetrate customers.” (CCAC

¶ 145). Phrases, like this one, expressing an “intention” are unactionable as forward-looking because

they express a plan to do something in the future. In

re Restortation Robotics Inc., 417 F. Supp. 3d at 1256.

The truth or falsity of this statement could not be discerned until after IPO. It was also accompanied by

meaningful cautions: defendants told potential investors that the failure to “retain, or expand the usage of,

and upsell our products to existing customers would

64a

harm our business and growth prospects.” (CCAC

¶ 160.)

Statement No. 5. This is also a forward-looking

statement protected by adequate cautionary language. Defendants state that they “believe our

opportunity to help businesses convert digital engagement into revenue will continue to grow as industries

modernize their sales and marketing processes, which

has been accelerated by the COVID-19 pandemic.”

(Id. ¶ 150.) The first problem for plaintiff, as stated

above, is that statements like we “believe” are generally too vague to be actionable. See In re Restoration

Robotics, 417 F. Supp. 2d at 1255. Moreover, the

Ninth Circuit has found that similar statements, like

“we continue to expect . . . to grow,” were inactionable

because they “plainly project expectations for future

growth.” Police Retirement Sys. of St. Louis, 759 F.3d

at 1058. In addition, this projection was couched in

cautionary language: defendants noted in the Offering Documents that these were “forward looking

statements” and warned customers that, as the impact of the COVID-19 pandemic lessened, demand for

their products might also decrease. (CCAC ¶ 159.) The

accompanying language is sufficient to put investors

on notice that ON24’s rosy projections for the future

might not materialize.

Statement No. 7. For much the same reasons,

the Court finds that Statement No. 7, as alleged, is

also purely forward-facing. Defendants state “[w]e intend to continue to focus on the acquisition of new

customers with 2,000 or more employees, or Enterprise customers, and to expand the usage of our

platform within these larger accounts.” (Id. ¶ 152.)

Plaintiff does not provide sufficient factual

65a

allegations to support its theory that ON24 had, in

fact, stopped focusing on the acquisition of Enterprise

customers. Given that, defendants were only stating

a present expectation for future plans. This was accompanied by meaningfully cautionary language.

Again, defendants tell investors that their “recent

revenue growth has been significantly impacted by an

increasing demand for our platform and products following the onset of the COVID-19 pandemic and

resulting precautionary measures. As the impact of

COVID-19 lessens, there may be reduced demand for

our platform, and our revenue growth rate may decline. If these new customers elect not to continue

their subscriptions as the impact of COVID-19 lessens, our business, financial condition and results of

operations would be harmed.” (Id. ¶ 158.)

The Court therefore GRANTS the motion to dismiss with leave to amend as to Statement Nos. 2, 5,

and 7 on the ground they are protected by the bespeaks caution doctrine.4

False or Misleading Statements

Defendants argue that none of the statements

are actionable because plaintiff has not shown how

they could be false or misleading. Plaintiff disagrees.

The Court has addressed most statements above and

will address Statement Nos. 9–13 below. Here, the

4 Plaintiff’s reliance on Livid Holdings is, at this point,

misplaced. In Livid Holdings, the Ninth Circuit held that the

bespeaks caution doctrine does not extend to “statements of historical facts.” 416 F.3d at 948. Because plaintiff has not

adequately pled that high customer churned happened, much

less that ON24 knew it was happening before IPO, this holding

does not apply.

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Court analyzes the two remaining statements, Nos. 4

and 6.

Under Section 11, plaintiffs must plead “contemporaneous statements or conditions” showing the

“misleading nature of the statements when made.”

Ronconi v. Larkin, 253 F.3d 423, 432 (9th Cir. 2001).

For an omission to be misleading, “it must affirmatively create an impression of the state of affairs that

differs in a material way from the one that actually

exists.” Brody v. Transitional Hosps. Corp., 280 F.3d

997, 1006 (9th Cir. 2002) (citation omitted).

Statement No. 4 provides that defendants’ “land

and expand model drives expansion of new subscriptions within our existing customer base by selling

subscriptions to additional parts of existing customers’ organizations, expanding into new regional

divisions and upselling new solutions.” (CCAC ¶ 149.)

Plaintiff’s theory on why this statement is misleading

eludes. On its face, the statement reads like a description of how ON24 upsells its customers. The CCAC

itself notes that one of ON24’s strategies for growth

was upselling customers in this manner. (CCAC ¶ 6.)

Even taking all of plaintiff’s allegations as true, this

description of ON24’s land and expand model would

not change. Plaintiff has therefore not shown how the

alleged omission of ON24’s customer churn affirmatively created a state of affairs that differs from the

one that actually exists as explained in Statement

No. 4.

Statement No. 6. As alleged, plaintiff also fails

to show how this statement is false or misleading. Defendants state that they have “seen an increase in the

proportion of multi-year subscriptions as the number

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of larger customers has increased.” (CCAC ¶ 151.)

While the statement above contains vague terms like

“increase,” the next statement (which is unchallenged) contains data, namely: “Customers with

multi-year subscription agreements accounted for

21% to 27% of ARR as of December 31, 2018, and September 30, 2020, respectively.” (Id.) Plaintiff offers no

contemporaneous facts that challenge these figures.

As stated above, such data, when accurately reported,

will rarely give rise to a securities violation. See In re

Nimble Storage, 252 F. Supp. 3d at 853–54. Instead,

plaintiff contends that this statement was misleading

because ON24 knew, prior to IPO, that there was high

customer churn. Without more, the allegation that

the statement necessarily misleads relies on the bald

allegations discussed above. Alone, there is no basis

to conclude it is misleading.

Plaintiff’s reliance on In re Restoration Robotics

does not persuade. There, Judge Davila held that a

company materially misled investors when it told

them it had experienced a 34% increase in sales of a

certain type of system. 417 F. Supp. 3d at 1261.

Though technically accurate, plaintiffs adequately alleged this figure was a “half-truth” because the

company had lumped together both domestic and foreign sales without telling investors that those

systems sold internationally had not yet been installed and therefore revenue in that area had fallen.

Id. Plaintiffs succeeded there because they demonstrated that the number of sales was aggregated in

such a way as to mislead investors about expected

revenue. In other words, because increased sales did

not necessarily equate to increased revenues, the

court found that plaintiffs had stated a claim.

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Plaintiffs here have missed a step. They did not adequately plead that defendants’ data was a “half-truth”

because they did not show that increased multi-year

subscriptions do not necessarily equate to increased

revenues. Without that connection, ON24’s data point

simply reads as on point.

For those reasons, the Court GRANTS the motion

to dismiss with leave to amend as to Statement Nos.

4 and 6 on the ground that, as alleged, they are not

misleading.

Risk Factors

Finally, plaintiff challenges the adequacy of various of ON24’s risk factors, Statement Nos. 9–13.

Plaintiff alleges that were materially misleading because they failed to “warn of significant, thenmaterialized risks posed by ON24’s one-time and

event only customers that planned to either not renew

or downsell.” (CCAC ¶ 156.) Defendants disagree, arguing that the risks factors were abundant and

specific and, moreover, the risk of which plaintiff

sought warning—the alleged churn of one-time customers who subscribed less than a year before the

IPO—did not occur until after the IPO and therefore

ON24 could not have disclosed this churn in its Offering Documents.

“Section 11 does not require the disclosure of all

information a potential investor might take into account when making [their] decision.” Rubke, 551 F.3d

at 1163. A company is not required to forecast future

events or caution about contingencies outside of its

control. In re Stac, 89 F.3d 1399, 1406–07 (9th Cir.

1996). For that reason, risk factors are materially

misleading only if they failed to warn of risks that had

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already come to fruition. Siracusano v. Matrixx Initiatives, Inc., 585 F.3d 1167, 1181 (9th Cir. 2009).

Plaintiff challenges the following risk factors:

•

Statement No. 9: Defendants warned investors that some of the risks entailed were:

(1) their “ability to sustain our recent

growth rate in the future, attract new customers and expand sales to existing

customers;” (2) “fluctuation in [their] performance”; (3) competition and “any decline in

demand for our solutions;” (4) their “ability

to expand our sales and marketing capabilities and otherwise manage our growth;

(5) “the impact of the COVID-19 pandemic”

(CCAC ¶ 157)

•

Statement No. 10: Defendants warned

that they “may not be able to sustain our recent revenue growth rate in the future . . .

Our recent revenue growth has been significantly impacted by an increasing demand

for our platform and products following the

onset of the COVID-19 pandemic and resulting precautionary measures. As the

impact of COVID-19 lessens, there may be

reduced demand for our platform, and our

revenue growth rate may decline. If these

new customers elect not to continue their

subscriptions as the impact of COVID-19

lessens, our business, financial condition

and results of operations would be harmed”

(CCAC ¶ 158)

•

Statement No. 11: “Our quarterly results

may fluctuate significantly and may not

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fully reflect the underlying performance of

our business . . . For example, our revenue

and revenue growth rate may decline in future periods compared to 2020 as the impact

of COVID-19 lessens . . . If fewer new enrollments or renewals occur as the impact of

COVID-19 lessens, our cash and deferred

revenue as of future dates may decrease.”

Defendants warned that factors that might

influence fluctuation were their “ability to

retain and expand customer usage” and

their “ability to attract new customers”

(CCAC ¶ 159)

•

Statement No. 12: “Failure to attract new

customers or retain, expand the usage of,

and upsell our products to existing customers would harm our business and growth

prospects . . . As a result, customers may

not renew their subscriptions at the same

rate, increase their usage of our solutions or

purchase subscriptions for additional solutions, if they renew at all. Renewals of

subscriptions may decline or fluctuate because of several factors, such as

dissatisfaction with our solutions or support, a customer no longer having a need for

our solutions or the perception that competitive products provide better or less

expensive options . . . In addition to striving

to attract new customers to our platform,

we seek to expand the usage of our solutions

by our existing customers by increasing the

number of departments, divisions and

teams that use our solutions within each of

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our customers. If we fail to expand the usage of our solutions by existing customers or

if customers fail to purchase other solutions

from us, our business, financial condition

and results of operations would be harmed”

(CCAC ¶ 160)

•

Statement No. 13: “Our results of operations may be adversely impacted by the

COVID-19 pandemic . . . [T]he economic impacts of COVID-19 have affected and may

continue to affect customer and prospective

customer spending on technology such as

ours, particularly for businesses involving

in-person interactions, such as hospitality,

manufacturing and professional services

businesses. These customers may experience reduced revenue and revised budgets,

which may adversely affect our customers’

ability or willingness to purchase subscriptions to our platform, the timing of

subscriptions, customer retention, and the

value or duration of subscriptions, all of

which could adversely affect our operating

results . . . Due to our subscription-based

business model, the effect of the COVID-19

pandemic may not fully be reflected in our

results of operations until future periods . . .

The global macroeconomic effects of the

COVID-19 pandemic and related impacts

on our customers’ business operation

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