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Based in New York, New York, Olo provides software to restaurants to assist with online ordering and food-delivery coordination. On February 12, 2020, Olo announced a partnership with Subway® restaurants (“Subway”) to enable Subway’s more than 20,000 U.S.-based restaurants to handle digital orders from third-party “marketplaces” such as Uber Eats or DoorDash. Olo, short for “online ordering,” then went public via an initial public offering (“IPO”) in March 2021 as online ordering from restaurants and home-delivery services were enjoying unprecedented popularity due to the COVID-19 pandemic. In its IPO, Olo offered its shares for sale at $25 per share and opened trading at $32 per share.
Throughout the Class Period, the Company highlighted its “Active Locations” as a “Key Business Metric” that “demonstrates the growth and scale of our overall business and reflects our ability to attract, engage, and monetize our customers and [ ] drive revenue.” After the close of markets on August 10, 2021, Olo reported that it ended the second quarter of 2021 with approximately 74,000 active locations, which represented a 30% increase over the same period in the prior year. The Company’s reported active locations included approximately 15,000 Subway locations, which eventually represented approximately 20% of the Company’s reported active locations. As Olo reported increasing active locations, its stock price soared to trade above $45 per share.
Plaintiff alleges that Defendants made materially false and misleading statements throughout the Class Period. Specifically, Plaintiff alleges that Defendants failed to disclose that: (1) Subway was ending its contract with Olo; and (2) Olo’s key business metric – active locations – could not continue to grow as Defendants touted due to the loss of Subway’s business.
The true state of Olo’s relationship with Subway was revealed after the markets closed on August 11, 2022. That day, the Company reported its results for the second quarter of 2022 and reduced its guidance for full-year 2022. Olo revealed that 2,500 Subway locations had begun to directly integrate with third-party marketplaces and that the remaining 15,000 Subway locations would be removed from the Company’s active locations count in the fourth quarter of 2022 and the first quarter of 2023. The Company acknowledged that the previously undisclosed Subway exodus had been known internally throughout the Class Period. Indeed, Chief Financial Officer (“CFO”) Peter J. Benevides (“Benevides”) instructed analysts that “when we entered the year, there was an indication that Subway may plan to directly integrate with marketplaces.” On this news, the Company’s stock price fell over 36%, to close at $8.26 per share on August 12, 2022.