Facts

Skillz Inc. is a mobile gaming technology company. Its platform allows users to play "contests" against each other, either paid contests in which users pay money for a chance to win cash prizes or practice contests in which users play for free. Skillz offers a set of software tools and programs called a Software Development Kit that game developers can integrate into their own games if they want to use Skillz's competitive gameplay platform. Skillz exclusively generates revenue by collecting a percentage of the entry fees for paid contests. On December 16, 2020, Skillz went public by merging with Flying Eagle Acquisition Corporation. On March 18, 2021, Skillz launched a secondary underwritten public offering pursuant to a registration statement on Securities and Exchange Commission Form S-1. On May 7, 2021, Thomas Jedrzejczyk brought a putative securities class action against Skillz Inc. and various corporate officers, alleging various violations of the Securities Exchange Act of 1934, as well as the Securities Act of 1933. On July 14, 2021, the court consolidated the case with Schultz v. Skillz Inc. f/k/a Flying Eagle Acquisition Corp.., et al., a substantially related case.

PLAINTIFF'S CONTENTIONS: Plaintiff alleged that defendants made several misleading statements or omissions intentionally or with deliberate recklessness: there were declining play and downloads in its top games despite statements indicating growth; the planned expansion into India was years away from completion, rather than imminent; overstatement of Skillz's technical capabilities in terms of synchronous play, as the capability was only in a testing phase; across the board growth and engagement of its userbase, when in reality plaintiff made most of its money from a very small proportion of users; use of misleading metrics by attributing revenue growth to higher monthly average users rather than disclosing average revenue per paying user; materially understating's Skillz's liabilities in its 2020 financial statements due to its classification of SPAC warrants as assets, rather than liabilities, and misrepresenting that its internal disclosure controls were adequate; and failing to identify paying MAUs as the primary driver of revenues in defendants' financial statements. Finally, plaintiff argued that the inclusion of "bonus cash," an incentive given to users which essentially gives them the equivalent of a gift card in funds to play with, in the "revenue" category of financial statements was misleading.

DEFENDANTS' CONTENTIONS: For the Exchange Act claims, Defendants argued that Plaintiffs failed to plead falsity for each category of alleged misstatement or omission, did not adequately plead facts indicating a strong inference of scienter, and did not sufficiently plead loss causation. For the Securities Act claims, Defendants argued that the one named plaintiff bringing those claims lacked statutory standing because he failed to trace his shares to the secondary offering. Further, defendants maintained that plaintiff's allegation that they purchased their shares on the day of the secondary offering and for the same offering price was insufficient to establish statutory standing. Defendants also argued that the one named plaintiff had not adequately alleged a false statement of fact under the Securities Act.

Result

Defendants' motion to dismiss were granted in full, including because plaintiffs had not sufficiently pled falsity or scienter to state an Exchange Act claim, and because the one named plaintiff to bring Securities Act claims lacked statutory standing and did not adequately pled untrue statements or omissions of material facts.