According to the Complaint, Arlo provides smart connected devices that can purportedly monitor environments in real-time using its cloudbased platform. This is accomplished by using a Wi-Fi or cellular network Internet connection in the Americas, Europe, the Middle-East, Africa, and the Asia Pacific regions. By using Arlo’s cloud-based platform, consumers may engage in real-time with their families and businesses from any location with an internet connection. Arlo also offers Wi-Fi- and LTE-enabled cameras, advanced baby monitors, and smart security lights.
On August 6, 2018, Arlo filed its prospectus for its upcoming IPO with the SEC, which forms part of the Registration Statement. Arlo sold 11,747,250 shares of common stock at $16.00 per share in its IPO, for proceeds of approximately $167.4 million, net of underwriting discounts and commissions, purportedly to be used for general corporate purposes.
Arlo was a wholly-owned subsidiary of NETGEAR, Inc. before the IPO. NETGEAR offers products enabling networking, broadband access, and network connectivity. NETGEAR owned approximately 84.2% of the shares of Arlo’s outstanding common stock after the IPO.
On November 30, 2018, Arlo announced its “flagship wire-free security camera system” called Arlo Ultra (“Ultra”). The Company touted a “newly designed rechargeable battery” that would purportedly enable the Ultra product to provide 4K Ultra HD resolution with high dynamic range, color night vision, and advanced image processing.
The Complaint alleges that Defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. The Complaint alleges that, specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) there was a flaw and/or quality issue with Arlo’s newly designed battery for its Ultra camera systems; (ii) this flaw and/or quality issue with the Ultra battery could result in a shipping delay of Arlo’s Ultra product; (iii) such a shipping delay endangered Arlo’s chances of launching the Ultra product in time for the crucial holiday season; (iv) such a shipping delay would allow Arlo’s competitors to capitalize on the Ultra product’s missed launch, thereby increasing their own market share; (v) Arlo’s consumers had been experiencing battery drain issues and other battery-related issues in connection with recent firmware updates; (vi) because of the foregoing, Arlo’s fourth quarter 2018 results and consumer base would be negatively impacted; and (vii) as a result, Arlo’s Registration Statement was materially false and misleading at all relevant times.
On May 6, 2019, the Court issued an Order appointing Lead Plaintiff and Counsel. Lead Plaintiff filed an amended Complaint on June 7. Defendants filed a Motion to Dismiss the amended Complaint on August 6. On December 19, the Court issued an Order granting Defendants' Motion to Dismiss. Plaintiffs were given leave to amend the Complaint. On February 14, 2020, Lead Plaintiff filed a second amended Complaint. On June 11, the parties entered into a Stipulation and Agreement of Settlement. The Court issued an Order granting preliminary approval of the Settlement on September 24.