An online event firm that experienced a ramp-up in users during the pandemic and that completed an IPO in early in February 2021 has been hit with a securities class action lawsuit after the company disclosed that many of the customers that signed on during the early days of the pandemic did not renew or renewed only at lower service levels. This new lawsuit is the latest of example of the ways that more than a year and half in the pandemic continues to affect businesses and continues to lead to securities class action litigation and other D&O claims. The November 3, 2021 complaint filed against ON24 can be found here.



ON24, Inc. is a cloud-based platform that provides or hosts interactive webinars, virtual events, and multimedia content. During the period January 2020 through September 2020, the company experienced a 174% year-over-year increase in the number of “digital experiences” and an increase in “engagement minutes” of over 167%.


On February 3, 2021, the company completed an IPO. In its offering documents, the company noted, among other things, that the company experienced significant revenue growth in 2020 that was driven by “increased demand for [the company’s] platform and products following the onset of COVID-19 pandemic and resulting precautionary measures.” The offering documents credited the growth to the company’s efforts to acquire new customers and to “retain and expand” the use of ON24’s solutions “across its existing customer base.”


On August 10, 2021, the company announced its second quarter 2021 financial results. Among other things, the company lowered its revenue guidance for the third quarter and for the full year 2021. In an analyst call the same day, the company’s CEO said that the company had “experienced higher-than-expected churn and down-sell from customers it signed up in the second quarter last year during the peak of COVID-19,” adding that “this higher churn was primarily in the first-time renewal cohort, customers who signed one-year contracts last year and who were up from renewal.”


On this news several analysts cut their ratings on the company. One analyst, commenting on the company’s second-quarter results who lowered his rating on the firm said that the company’s results were the result of “COVID tourist departures,” commenting further that “a significant number of transitory customers who had joined ON24’s platform out of necessity during the pandemic chose not to renew.”


According to the subsequently filed securities lawsuit complaint, the company’s share price declined 31% on the news, and as of the date of the lawsuit’s filing was trading nearly 63% below the IPO price.


The Lawsuit

On November 3, 2021, a plaintiff shareholder filed a securities class action lawsuit in the Northern District of California against ON24; certain of its directors and officers; and its offering underwriters. The complaint purports to be filed on behalf of “all persons and entities that purchased, or otherwise acquired, ON24 common stock issued in connection with the Company’s IPO.” The complaint alleges that the defendants violated Sections 11, 12, and 15 of the Securities Act of 1933. The complaint seeks to recover damages on behalf of the class.


The complaint alleges that the statements and representations in the offering documents prepared in connection with the company’s IPO were “materially inaccurate, misleading, and/or incomplete” because they failed to disclose, among other things, that “the surge in COVID-19 customers ON24 observed in the lead up to the IPO consisted of a significant number that did not fit ON24’s traditional customer profile and, as a result, were significantly less likely to renew their contracts.”



By my count, this lawsuit is the 36th coronavirus-related securities class action lawsuit to be filed since the initial U.S outbreak in March 2020. It is the 12th coronavirus-related securities suit to be filed so far in 2021 – obviously the pace of coronavirus-related securities suit filings has slowed during 2021 compared to last year. This new lawsuit is also the first coronavirus-related securities suit to be filed since September 16, 2021.


Just as the coronavirus itself has produced new variants as time has gone by, the coronavirus-related litigation is leading to new variants as well. Thus, for example, there have been several coronavirus-related securities lawsuits filed in the last 18 months involving companies that claimed that they would be able to profit from the pandemic (such as vaccine development firms, diagnostic testing companies, personal protective equipment manufacturers, and online learning companies) but that subsequently failed to realize the hoped-for benefit.


This lawsuit, by contrast, involves a company that clearly benefited tremendously from government shutdown orders and other changed conditions at the outset of the pandemic, and that took advantage of its improved performance to complete an IPO, but that subsequently experienced a financial letdown as the pandemic-related conditions evolved.


Many companies are experiencing changed conditions as the pandemic’s effects continue to roll through the economy and affect business conditions. It seems likely to me that these changing circumstances (including such secondary effects such as labor shortages and economic inflation) will continue to affect companies’ operations and financial performance; these operational and financial impacts will in some circumstances translate into share price declines, and in at least some cases into securities litigation or other D&O claims. In other words, I think we could continue to see coronavirus-related securities class action litigation and other D&O claims for some time to come.