A Manhattan Supreme Court judge has dismissed a securities class action claim against Brazilian online retailer Netshoes (Cayman) Limited, finding the suit failed to support allegations that the company had purposely misrepresented key aspects of its business to would-be investors.

The cause of action, brought under federal securities law, claimed that the Brazilian online  sporting goods retailer “painted a materially false and misleading picture of Netshoes' business” in the face of increasing competition, which improperly lifted its IPO offering price in 2017. Investors said the alleged missteps ultimately caused Netshoes' stock price to collapse from its $18 per-share IPO price to a low of $2.87 per share 13 months later.

However, New York County Supreme Court Justice Andrew S. Borrok, in a revised opinion released Wednesday, ruled that statements cited from Netshoes' IPO materials were either opinion, accurate assessments of past performance or expressions of “puffery or corporate optimism” that are not actionable under the statute.

“Absent factual allegations demonstrating that these statements were false or misleading when made (and there are none in the complaint), statements concerning Netshoe's customer loyalty and past performance do not give rise to a securities claim,” Borrok wrote last week in an 18-page revised opinion, published July 17.

Skadden, Arps, Slate, Meagher & Flom, which represented Netshoes, said the decision was one the first to dismiss a securities class action for allegedly false or misleading disclosures since the U.S. Supreme Court unanimously affirmed in 2017 that state courts have jurisdiction to hear such cases.

According to Borrok's ruling, plaintiffs had targeted Netshoes' pre-IPO statements touting its competitive position, “high margin” strategy and new supplements and vitamins business. The complaint, however, alleged that, in fact, Netshoes' core sports and lifestyle e-commerce business was under pressure to significantly ramp up marketing and provide deeper discounts to preserve its business model in light of increased competition from Mercado Libre, its rival in Latin America, as well as from Amazon, which was active in Mexico at the time.

Netshoes, the plaintiffs alleged, knew or should have known that the net income the net income it posted in 2016 was overstated and in line with the international reporting standards it cited in its offering documents.

Reviewing the case under the Omnicare standard, Borrok said there was no evidence in the complaint to support allegations that Netshoes knew its statements concerning competition were false when they were made. On other points regarding the company's future growth, he said, Netshoes shared relevant risk factors with investors, and its forward-looking statements were protected by “ample cautionary language” in the prospectus, which isolated the company from legal challenges.

“Netshoes disclosed the information that the plaintiffs claim was omitted,” he said. “To the extent that it did not disclose certain information, it had no duty to do so.”

Skadden attorneys were not available Friday afternoon to comment on the decision.

Thomas Laughlin, a Scott+Scott attorney who represented the proposed class did not immediately return a call seeking comment.

The case was captioned In re Netshoes Securities Litigation.

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