b'First CircuitIn re Wayfair Inc. Sec. Litig., Case No.bare allegations of omissions; (ii) allegations of general 1:19-cv-10062-DPW, 471 F. Supp. 3d 332knowledge of finances and stock sales were insufficient (D. Mass. 2020) to plead scienter; and (iii) plaintiffs failed to plead loss causation.Wayfair Inc. (Wayfair) is a global online home goodsThe court further rejected plaintiffs allegations retailer. On July 1, 2019, certain Wayfair shareholdersthat Wayfair misled investors by omitting that it was filed an amended consolidated class action complaintsignificantly increasing ad spending in the face of against Wayfair, its CEO, board co-chair, and CFOcompetition, that its increase in operating expenses alleging violations of Sections 10(b) and 20(a) of thereduced the companys margins, that the company was 1934 Act and Rule 10b-5 promulgated thereunder. Inunable to drive positive revenue growth, and that the the complaint, plaintiffs alleged that as online retail hascompany was becoming increasingly less profitable grown and as Wayfair has faced increasing competition,due to escalating advertising and operating expenses Wayfair needed to spend more and more money onneeded to maintain revenue growth. In doing so, advertising to leverage revenue. Plaintiffs alleged that,the court noted that it was obvious from Wayfairs as a result, during the class period (August 2, 2018 public statements and [from] the fact that it increased October 31, 2018), Wayfairs advertising-revenueadvertising spending year to year over the most recent leverage was worse (i.e., deleveraged) than inyears that Wayfairs ad spending increased.previous years, and, more specifically, contended that Wayfairs November 1, 2018 third quarter 2018 FormThe court also rejected plaintiffs scienter arguments. 10-Q revealed that the company narrowly missedFirst, the court disagreed that, because defendants its advertising-revenue leverage financial projection.were intimately involved in Wayfairs finances and Plaintiffs asserted that the defendants knew butoperations, they knew Wayfairs financial position concealed from investors that their advertising leveragewas worse than disclosed to the market, holding would decrease and made false statements regardingsuch argument was akin to saying that any time a Wayfairs advertising-revenue leverage and thecompanys financial projection is wrong, the speaker companys overall financial position. Plaintiffs alsohas engaged in securities fraud. Second, the court alleged that the individual defendants capitalized onrejected plaintiffs argument that the individual an artificial increase in stock price over the class perioddefendants trading activity throughout the class by collectively selling $69 million of their own shares inperiod evidenced scienter, concluding that the trades transactions from August to October 2018. appeared to be evenly spaced throughout the period, and none were suspiciously close to the class period On August 30, 2019, defendants moved to dismiss thehigh. The court observed that the CEO and the board amended complaint. The court granted the motion toco-chair both had significant trades just two days dismiss with prejudice on July 8, 2020, noting in itsbefore the disappointing Q3 2018 financial results were first sentence that the amended complaint was filedannounced, but held that plaintiffs failed to plead that by several individuals who say they [] lost moneythe stock trades were abnormal or unusual, which was because Wayfair missed its quarterly financialnecessary to support scienter. Instead, the court held projection by .002% one quarter. In sum, the courtthat the evidence suggested the opposite given that concluded that (i) the challenged statements werethe trades were executed pursuant to 10b5-1 trading either inactionable puffery, forward looking statementsplans, the CEO and board co-chair only decreased their accompanied by meaningful cautionary languageholdings by 2% overall, and the CFO actually increased which were protected by the PSLRAs safe harbor, orhis holdings by 22%.86'