In re Mindbody Inc. Sec. Litig.

OPINION AND ORDER   In this securities class action, Plaintiffs allege that Defendant Mindbody, Inc. (“Mindbody” or “Company”) and certain corporate insiders falsely depressed the Company’s stock prices by announcing an unwarranted negative outlook for fourth quarter 2018, in order to facilitate a proposed privatization on the cheap in early 2019. The Amended Complaint asserts misleading statements and omissions and deceptive conduct in violation of Section 10(b) of the Securities and Exchange Act and Rule 10b-5(b) promulgated thereunder, as well as misleading proxy materials that allegedly mischaracterized the merger offer and process. The Court finds that Plaintiffs have plausibly alleged material misstatements or omissions based on (i) Defendants’ failure to disclose Mindbody’s better-than-predicted fourth quarter earnings ahead of the shareholder vote on privatization, when they knew that negative guidance had caused share prices to plunge by 20 percent and that the gloomy guidance turned out to be inaccurate, and (ii) Defendants’ statements in the proxy materials that Mindbody did not discuss the retention of executives with the buyer prior to the signing of the merger agreement. As set forth below, Defendants’ motion to dismiss is granted in part and denied in part. BACKGROUND For purposes of Defendants’ motion to dismiss, the Court “accepts as true all wellpleaded factual allegations in the complaint, draws all reasonable inferences in favor of the nonmoving party, and considers, in addition to the complaint, and written instruments attached, statements incorporated by reference, and public disclosure documents filed with the SEC.” Gamm v. Sanderson Farms, Inc., 944 F.3d 455, 462 (2d Cir. 2019). I. Mindbody’s Business Mindbody, a Delaware corporation, is a software company that provides business management and payment software to approximately 67,000 fitness and beauty businesses, such as gyms and yoga studios. Am. Comp. (Dkt. 22)

39, 50. During all relevant times, Defendants Richard Stollmeyer, Brett White, and Eric Liaw served as Mindbody’s CEO, CFO, and member of the board of directors, respectively. Id.