b'addressing ongoing efforts and future plans, but held such as specific email domains, devices, and the allegations were not specific enough to nationalgeographicsthat Dropbox believed made them television campaigns to be deemed false or misleadingmore likely than other users to convert to paying users. by Stitch Fixs dark test in 4Q 2018, instead referencingDropbox disclosed in its Registration Statement that radio, local television, and online advertising. Theits revenue growth rate declined in recent periods and court explained that it was not defendants burden tomay continue to decline. The Registration Statement specify what type of advertising it was using as plaintiffsalso contained risk factors that its business model had argued, placing the pleading burden squarely ondepends on its ability to retain and upgrade paying plaintiffs to plead why, against those facts, defendantsusers and that its growth could be harmed if the more general, earlier statements about televisioncompany failed to attract new users or convert existing advertising became misleading because it turned outusers to paid subscribers. Dropbox completed its IPO Stitch Fix had paused national television advertising only,on March 23, 2018, issuing over 26 million shares of for a period of 10 weeks.common stock for $21.00 per share and generating With respect to the challenged statements about Stitchproceeds of more than $500 million.Fixs active client growth, the court rejected plaintiffsFollowing the IPO, Dropboxs revenue and paying argument that the June 7, 2018 statements that theuserbase increased each fiscal quarter, but consistent 30% active client growth demonstrate[s] Stitch Fixswith prior financials disclosed in the Registration continued positive momentum, that Stitch Fix wasStatement, these metrics slowed. On October 4, leveraging our performance, marketing capabilities2019, investors filed a putative class action lawsuit and increasing our brand awareness and that it wasagainst Dropbox, certain of its officers and directors, reflecting [sic] efficiencies weve seen with oura large institutional shareholder, and Dropboxs marketing spend to attract new clients gave the marketIPO underwriters, alleging violations of Sections 11 the impression that active client growth continued asand 15 of the 1933 Act, contending the Registration of June 7, 2018. The court concluded that [n]one of theStatement misled investors by failing to disclose that challenged statements can be read to give the falseDropboxs rate of converting free users to paying impression plaintiff ascribes to them because theusers was dropping, causing Dropbox to experience a statements reflected observations about what Stitchmaterial decline and/or slowdown in revenue growth. Fixs third quarter results demonstrate[d], and not aDefendants moved to dismiss on the grounds that contemporaneous note about how the company wasplaintiffs overall theory of liability failed because, doing at the time of the statement.among other things, the amended complaint lacked On November 6, 2020, plaintiff filed an amendedany factual allegations regarding user conversion, consolidated complaint, and defendants filed a motionand the disputed statements were not actionable to dismiss on December 7, 2020. That motion is fullybecause they were either accurate or statements of briefed and set for hearing on April 15, 2021.opinion. Defendants also argued that plaintiffs claims were time-barred.In re Dropbox Securities Litigation, Case No. 19-cv-06348, 2020 WL 6161502 (N.D. Cal.The court granted the motions to dismiss, with Oct. 21, 2020) Post-IPO Losses, Stagnating Growthleave to amend, agreeing with defendants Dropbox, Inc. offers cloud-based storage andthat it could not find a single factual allegation collaboration services. Its users can use either aabout Dropboxs user conversion rate, calling basic, free version of the service or pay for a monthlythis failure an elephant-sized hole in plaintiffs or annual subscription for an upgraded version. In connection with its IPO, Dropbox filed a Registrationtheory for liability as the entire complaint Statement explaining that its business model waswas premised upon the alleged decline of premised on three core factors: (1) new user sign ups (whether free or paying), (2) increasing the conversionDropboxs user conversion rate. of free users to paying users, and (3) upgrading and expanding the subscriptions used by existing paying users. The Registration Statement contained a table showing the number of paid users each year betweenThe court granted the motions to dismiss, with leave 2015 and 2017, disclosed that over 500 million usersto amend, agreeing with defendants that it could not were registered for its service, and estimated thatfind a single factual allegation about Dropboxs user about 300 million free-version users had characteristicsconversion rate, calling this failure an elephant-sized 41'