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Uber Shareholders Win Class Status on Claims of IPO Deceit (1)

July 27, 2022, 2:55 PMUpdated: July 27, 2022, 4:11 PM

Shareholders suing Uber Technologies Inc. for allegedly hiding information about the legality of its business model, its passenger safety record, and other issues may represent a class of investors who purchased stock when the company went public, a federal court in California ruled.

Common issues predominate over individualized ones, including “snippets of information” that people associated with one institutional investor may have had, Judge Richard Seeborg said Tuesday for the US District Court for the Northern District of California.

Seeborg approved a class definition that includes everyone who acquired the ride-hailing platform’s common stock pursuant or traceable to documents filed with the Securities and Exchange Commission before the initial public offering, with some exceptions for those with other close ties to Uber.

Boston Retirement System and other investors alleged Uber “premised its growth on an undisclosed and unsustainable ‘growth at any cost’ business model, putting growth first above profits, the law, and even passenger safety,” the investors said.

The offering documents misleadingly claimed that the company had reformed itself and changed its internal cultural norms, even though legal, safety, and growth problems persisted, according to the class certification motion.

Uber issued and sold more than 180 million shares of common stock in its IPO, according to the plaintiffs.

Uber’s stock dropped from $45 at the May 2019 IPO to about $26 in November 2019, the plaintiffs said.

Seeborg rejected Uber’s argument that the issues in the case weren’t common enough for class certification because BRS’s investment manager had employees who knew about the subjects Uber allegedly omitted from its IPO filings.

“In a securities class action against fellow rideshare operator Lyft, another court in this district rejected the contention that some knowledge about the problems Lyft faced concerning sexual assaults defeated predominance,” Seeborg said.

In that case, as here, the plaintiffs’ knowledge goes “to the awareness of a general issue, not the magnitude of the problems alleged,” he said.

BRS and four individual investors will be the class representatives.

Seeborg appointed Labaton Sucharow LLP as class counsel. Shearman & Sterling LLP and Willkie Farr & Gallagher LLP represent Uber.

The case is Bos. Ret. Sys. v. Uber Techs. Inc., N.D. Cal., No. 19-cv-06361, 7/26/22.

(Updated throughout with case information and court analysis.)

To contact the reporter on this story: Martina Barash in Washington at mbarash@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Carmen Castro-Pagán at ccastro-pagan@bloomberglaw.com; Brian Flood at bflood@bloomberglaw.com