Olo Inc. (OLO) Failed to Disclose Key Metrics Regarding its Relationship with Subway to Shareholders
A shareholder filed a class action on behalf of all persons and entities that purchased or otherwise acquired Olo Inc. (NYSE: OLO) Class A common stock between August 11, 2021 and August 11, 2022, for violations of the Securities Exchange Act of 1934. Olo provides software to restaurants to assist with online ordering and food-delivery coordination.
According to the complaint, 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.
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.
However, during the class period, defendants misled investors as to the Company’s success by citing active locations figures that included Subway locations that would imminently cease using the Company’s services and by failing to disclose that Subway would be ending its relationship with Olo. After markets closed on August 11, 2022, Olo reported its results for the second quarter of 2022 and reduced its guidance for full-year 2022. Olo also 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. In a stunning admission, the Company acknowledged that the previously undisclosed Subway exodus had been known internally throughout the class period. Indeed, Chief Financial Officer Peter J. Benevides instructed analysts that “when we entered the year, there was an indication that Subway may plan to directly integrate with marketplaces” and admitted that Olo took the undisclosed pending Subway departure into account when providing guidance for the year. On this news, the price of Olo stock fell approximately 36%, to close at $8.26 per share on August 12, 2022, erasing more than $480 million in shareholder value.
On December 1, 2023, Judge Rakoff denied in part defendants’ motion to dismiss the complaint, allowing certain claims against Olo to proceed. Class actions of this nature can harm the Company by depleting its corporate assets.
Next Steps: If you own shares of Olo Inc. common stock, you have an opportunity to assist the Company in protecting its assets and implementing valuable corporate governance reforms. Submit a form form for more information.
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