On July 26, 2017, Judge Claudia Wilken of the United States District Court for the Northern District of California denied a motion to dismiss a putative securities class action alleging that GoPro, Inc. (“GoPro”), its CEO, Nicholas Woodman, and other GoPro executives described in the Complaint but not named as defendants, had violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements regarding the rollout of a new camera and line of airborne drones.  Bielousov v. GoPro, Inc., No. 16-CV-06654-CW, 2017 WL 3168522 (N.D. Cal. July 26, 2017).  In so doing, the Court found that plaintiff had adequately alleged that a statement by GoPro’s CFO that “we believe” GoPro is “on track to make” its 2016 revenue guidance, was not covered by the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and, along with certain other representations, was false and mischaracterized the new drone’s availability and capabilities.

On September 19, 2016, GoPro unveiled its new line of HERO 5 Model cameras and the Karma quadrocopter drone, GoPro’s entry into the drone market.  GoPro asserted that the Karma drone would be available “through select retailers around the world” starting October 23, 2016, and its CFO told investors that GoPro was “on track” to meet the company’s February 2016 revenue guidance.  In a suit filed in November 2016, plaintiff alleged that these statements were false when made because GoPro was suffering severe product shortages and the Karma drone suffered from a design defect that led to a product recall on November 8, 2016.  Plaintiff further alleged that, as these events unfolded, GoPro’s stock price plummeted by more than 40%.

Although the Court noted that statements of being “on track” to hit revenue guidance had been held to be equivalent to statements of the guidance and, therefore, constituted forward looking statements, the Court held that adding the words “we believe” rendered the statement a present opinion covered by Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 135 S. Ct. 1318 (2015), that plaintiff had adequately pleaded was false or misleading.  GoPro, 2017 WL 3168522, at *5.  The Court further held that plaintiff had adequately pleaded that defendants knew or were reckless as to the falsity of the above statements, i.e., scienter, by making specific allegations regarding GoPro’s inventory tracking abilities, including the platform used, the executives’ statements that GoPro closely monitored inventory, and their motivation to do so in light of inventory problems in the past.  Id. at *6.

This decision serves as a potent reminder that statements of belief as to future events are not necessarily immune from securities law claims, especially if particularized facts are alleged showing that defendant was aware of contradictory information at the time the statements were made.