Shareholders sue Uber for hiding the illegality of their business
Those who bought shares in Uber Technologies Inc.’s IPO have sued the company for allegedly withholding information about the legality of its business model, its passenger safety record and other matters. The lawsuit represents multiple investors who bought shares when the company went public, a federal court in California has ruled.
Common issues trump individualized ones, including “bits of information” that people associated with an institutional investor may have had, Judge Richard Seeborg of the US District Court for the Northern District of California said Tuesday.
Seeborg approved a class definition that includes everyone who acquired the common shares of the trucking company in accordance with documents filed with the Securities and Exchange Commission prior to the initial public offering, with some exceptions for those with other close ties to Uber.
Boston Retirement System and other investors alleged that Uber “based its growth on an undisclosed and unsustainable ‘growth at any cost’ business model, putting growth above profits, the law, and even passenger safety.” investors said.
The offering documents misleadingly claimed that the company had reformed and changed its internal cultural norms, despite continuing legal, security and growth issues, according to the collective certification motion.
Uber issued and sold more than 180 million shares of common stock in its initial public offering, according to the plaintiffs.
Uber shares fell from $45 in the May 2019 Initial Public Offering (IPO) to around $26 in November 2019.
Seeborg rejected Uber’s argument that the issues in the case were not common enough for class certification because BRS’s investment manager had employees who knew about the issues that Uber allegedly omitted from its IPO filings.
“In a securities class action lawsuit against another ride-sharing operator Lyft, another court in this district rejected the claim that some knowledge about the issues Lyft was facing with regard to sexual assaults defeated preemption,” Seeborg said.
In that case, as here, the plaintiffs’ knowledge goes “to awareness of a general issue, not to the magnitude of the alleged problems,” he said. BRS and four individual investors will serve as class representatives.
Seeborg named Labaton Sucharow LLP as class counsel. Shearman & Sterling LLP and Willkie Farr & Gallagher LLP represent Uber.