The U.S. Court of Appeals for the Ninth Circuit issued a memorandum opinion Tuesday in *In Re: ON24, Inc. Securities Litigation*, affirming the dismissal of a securities class action lawsuit that accused the virtual event platform company and multiple investment banks of securities violations related to the company's 2021 initial public offering.
Leadersel Innotech ESG brought the class action on behalf of all persons and entities who purchased ON24's publicly traded common stock pursuant to the public offering documents issued in connection with the company's IPO. The plaintiff alleged that ON24's public offering documents contained six materially misleading statements that omitted critical facts about the company's customer churn rates and changes to its customer base prior to going public.
The case, which carries the docket number 24-2204, stemmed from litigation originally filed in the U.S. District Court for the Northern District of California under case number 4:21-cv-08578-YGR, with District Judge Yvonne Gonzalez Rogers presiding. The district court initially dismissed the case, prompting Leadersel's appeal to the Ninth Circuit.
The defendants in the case include ON24, Inc. and several of its executives, including Sharat Sharan, Steven Vattuone, Denise Persson, Holdger Staude, Dominique Trempont, Barry Zwarenstein, and Irwin Federman. The lawsuit also named major investment banking firms that served as underwriters for the IPO, including Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, KeyBanc Capital Markets Inc., Robert W. Baird & Co. Incorporated, Canaccord Genuity LLC, Needham & Company, LLC, Piper Sandler & Co., and William Blair & Company, L.L.C.
According to court documents, Leadersel's complaint centered on allegations that ON24's IPO documents failed to adequately disclose material information about customer churn—the rate at which customers discontinue their relationship with the business—that occurred before the public offering. The plaintiff argued that these omissions misled investors about the true state of ON24's customer base and business prospects.
The complaint offered two distinct theories of liability related to the alleged omissions. While the full details of these theories were not disclosed in the available court documents, they appear to involve claims of primary violations of federal securities laws, likely under Section 11 of the Securities Act of 1933, which governs disclosure requirements for public offerings.
The appellate proceedings experienced several delays and procedural developments. The case was initially argued and submitted on March 4, 2025, before a three-judge panel consisting of Chief Judge Mary Murguia and Circuit Judges Gabriel Sanchez and Holly Thomas. However, the submission was later vacated on Aug. 26, 2025, and the case was resubmitted for decision on Jan. 5, 2026, just two days before the court issued its memorandum opinion.
The Ninth Circuit's decision was issued as a memorandum opinion marked "NOT FOR PUBLICATION," indicating that while it resolves the dispute between the parties, it does not establish binding precedent for future cases. This designation is common for appeals court decisions that apply well-established legal principles to specific factual circumstances without breaking new legal ground.
The timing of the litigation reflects the broader trend of securities class actions following IPOs, particularly in the technology sector. ON24, which provides virtual event and webinar platform services, went public during a period of heightened investor interest in technology companies that benefited from remote work trends during the COVID-19 pandemic.
Customer churn rates have become increasingly important metrics for software-as-a-service companies and other subscription-based businesses, as they directly impact recurring revenue projections and long-term business viability. Investors and analysts closely scrutinize these metrics when evaluating technology companies, particularly those with subscription models.
The involvement of multiple major investment banks as defendants highlights the potential exposure that underwriters face in securities litigation. Investment banks that serve as underwriters for public offerings have legal obligations to conduct due diligence and ensure that offering documents accurately represent the company's financial condition and business prospects.
The dismissal at both the district court and appellate levels suggests that the plaintiff faced significant challenges in establishing that the alleged omissions about customer churn constituted material misrepresentations sufficient to sustain securities fraud claims under federal law.
The case represents one of numerous securities class actions filed against technology companies in recent years, as courts continue to define the boundaries of disclosure obligations for companies going public, particularly regarding forward-looking business metrics and customer relationship data that may be crucial to investor decision-making but difficult to predict or quantify with precision.