City of Hialeah Employees’ Retirement System v. Peloton Interactive, Inc.

24-2803
City of Hialeah Employees’ Retirement System v. Peloton Interactive, Inc.
In the
United States Court of Appeals
FOR THE SECOND CIRCUIT
AUGUST TERM 2024
No. 24-2803
C ITY OF H IALEAH EMPLOYEES ’ RETIREMENT S YSTEM, INDIVIDUALLY
AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
ROBECO C APITAL G ROWTH FUNDS SICAV – ROBECO G LOBAL
C ONSUMER TRENDS ,
Plaintiffs-Appellants,
v.
P ELOTON INTERACTIVE, INC ., THOMAS C ORTESE,
JOHN FOLEY , WILLIAM LYNCH, JILL W OODWORTH,
M ARIANA G ARAVAGLIA, H ISAO KUSHI,
Defendants-Appellees.*
On Appeal from the United States District Court
for the Southern District of New York
ARGUED: APRIL 11, 2025
D ECIDED: AUGUST 27, 2025
* The Clerk of Court is directed to amend the caption as set forth above.

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Before: N EWMAN, C HIN, and MENASHI , Circuit Judges.
Plaintiffs-Appellants City of Hialeah Employees’ Retirement
System and Robeco Capital Growth Funds SICAV brought this
putative class action on behalf of investors who purchased common
stock of Peloton Interactive, Inc., between February 5, 2021, and
January 19, 2022. The plaintiffs alleged that Peloton and its executives
violated the federal securities laws by making false and misleading
statements about demand for the company’s fitness products and
inventory levels following the COVID-19 pandemic. The district court
dismissed the complaint on the ground that the plaintiffs failed to
allege any actionable material misstatement or omission of fact. We
conclude that the complaint plausibly alleged an actionable material
misstatement. We affirm in part, vacate in part, and remand to the
district court for further proceedings consistent with this opinion.
Judge Newman concurs in part and dissents in part in a
separate opinion.
KARIN E. FISCH (Daniel E. Berger, Cecilia E. Stein, Mica
A. Cocco, on the brief), Grant & Eisenhofer P.A., New
York, NY, for Plaintiff-Appellant Robeco Capital Growth
Funds SICAV – Robeco Global Consumer Trends.
Hannah G. Ross (Avi Josefson, Jonathan D. Uslaner,
Caitlin C. Bozman, on the brief), Bernstein Litowitz Berger
& Grossmann LLP, New York, NY, for Plaintiff-Appellant
City of Hialeah Employees’ Retirement System.
MELISSA ARBUS S HERRY , Latham & Watkins LLP,
Washington, DC (Andrew B. Clubok, Latham & Watkins
LLP, Washington, DC, Michele D. Johnson, Latham &

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Watkins LLP, Costa Mesa, CA, on the brief), for
Defendants-Appellees.
MENASHI , Circuit Judge:
Plaintiffs-Appellants City of Hialeah Employees’ Retirement
System and Robeco Capital Growth Funds SICAV brought this
putative class action on behalf of investors who purchased common
stock of Peloton Interactive, Inc., between February 5, 2021, and
January 19, 2022. The plaintiffs alleged that Peloton and its executives
made false and misleading statements about consumer demand for
the company’s fitness products and inventory levels following the
COVID-19 pandemic. The district court dismissed the complaint on
the ground that the plaintiffs failed to allege any actionable material
misstatements or omissions.
We agree with the district court that most of the alleged
misstatements were not actionable. But we conclude that the plaintiffs
plausibly alleged actionable misstatements or omissions based on
three statements. We vacate the judgment of the district court insofar
as it dismissed the claims based on those statements, and we
otherwise affirm. We remand for further proceedings consistent with
this opinion.
BACKGROUND
“We review a district court’s grant of a motion to dismiss de
novo, accepting as true all factual claims in the complaint and drawing
all reasonable inferences in the plaintiff’s favor.” Henry v. County of
Nassau, 6 F.4th 324, 328 (2d Cir. 2021) (internal quotation marks
omitted). We rely on the facts alleged in the second amended
complaint (“SAC”) in deciding this appeal.

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I
Peloton is a fitness company that manufactures and produces
stationary bikes and treadmills. It sells a monthly subscription service
that allows users to participate in remote fitness classes using the
company’s online fitness platform. During the COVID-19 pandemic
in 2020, demand for Peloton’s products surged as gyms closed and
consumers sought at-home fitness alternatives. Because of the
increase in demand, Peloton began to experience supply-chain
logistics issues and substantial backlogs in delivering its products to
customers. In response, Peloton expanded its manufacturing capacity
and told investors that it would invest in its supply chain to keep up
with demand for its products.
By early 2021, the plaintiffs alleged, the surge in demand had
waned as vaccines became accessible and gyms reopened. The
plaintiffs alleged that Peloton and its executives concealed the
declining demand from investors and publicly stressed that the
company’s investment in its supply chain was necessary given the
sustained strong demand for its products.
The plaintiffs’ allegations are supported by statements from
thirty-one confidential witnesses, primarily former Peloton
employees who worked in different departments and geographic
locations. The confidential witnesses reported that (1) demand for
Peloton’s products began to decline significantly by early 2021;
(2) sales personnel repeatedly missed their quotas, even after those
quotas were reduced; (3) Peloton’s internal systems tracked sales data
in real-time, showing declining demand and sales; (4) inventory
levels at warehouses increased dramatically, with facilities struggling
to store excess inventory; and (5) by August 2021, Peloton had three
months of excess inventory at shipping ports.

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On November 4, 2021, Peloton disclosed that 91 percent of its
inventory was unsold, and it reduced its earnings guidance by more
than $1 billion. The next day, Peloton’s stock price dropped by 35
percent. On January 20, 2022, additional news reports revealed that
Peloton had halted production of its bikes to manage excess
inventory. Peloton’s stock price dropped an additional 24 percent
following these reports.
II
City of Hialeah Employees’ Retirement System (“City of
Hialeah”) is a benefit pension plan based in Hialeah, Florida, that
provides pension services and benefits to employees, retirees, and
beneficiaries of the City of Hialeah. Robeco Capital Growth Funds
SICAV (“Robeco”) is an open-ended investment company based in
Rotterdam, Netherlands. Both City of Hialeah and Robeco purchased
Peloton common stock at allegedly artificially inflated prices during
the period from February 5, 2021, to January 19, 2022.
In November 2021, City of Hialeah, on behalf of itself and
similarly situated plaintiffs, filed a putative class action complaint
against Peloton, Thomas Cortese, John Foley, William Lynch, Jill
Woodworth, Mariana Garavaglia, and Hisao Kushi, alleging
violations of § 10(b), § 20(a), and § 20A of the Securities Exchange Act
of 1934 and of Rule 10b-5 promulgated thereunder. Robeco was
appointed lead plaintiff in May 2022.
On June 25, 2022, Robeco filed an amended complaint, alleging
that the defendants made eighteen statements about Peloton’s
demand and inventory that were knowingly false or misleading. The
defendants filed a motion to dismiss for failure to state a claim under
Federal Rule of Civil Procedure 12(b)(6), which the district court
granted on March 30, 2023. The district court held that (1) eight of the

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challenged statements were forward-looking statements protected by
the statutory safe harbor of the Private Securities Litigation Reform
Act of 1995 because those statements included “extensive” and
“meaningful cautionary language”; (2) five of the challenged
statements were non-actionable puffery, lacking “specific metric[s] on
which the investing public would reasonably rely”; and (3) none of
the challenged statements were materially false or misleading when
made. Robeco Cap. Growth Funds SICAV – Robeco Glob. Consumer Trends
v. Peloton Interactive, Inc., 665 F. Supp. 3d 522, 538-42 (S.D.N.Y. 2023).
The district court granted the plaintiffs leave to amend the complaint.
On May 6, 2023, Robeco filed the SAC, which contained
additional facts from another twenty-four confidential witnesses and
included additional alleged misstatements. The defendants again
moved to dismiss. On September 30, 2024, the district court dismissed
the SAC on the ground that the plaintiffs still failed to plead any
actionable misstatements or omissions. Robeco Cap. Growth Funds
SICAV – Robeco Glob. Consumer Trends v. Peloton Interactive, Inc.,
No. 21-CV-9582, 2024 WL 4362747, at *9 (S.D.N.Y. Sept. 30, 2024). The
district court decided that Peloton’s statements were “entirely
consistent with Peloton’s actual financial results” and that the
allegations based on confidential witness accounts were “anecdotal”
and did not reflect Peloton’s performance “as a whole.” Id. at *11
(internal quotation marks omitted). Having concluded that the
plaintiffs failed to plausibly allege a claim under § 10(b) and Rule 10b-
5, the district court dismissed the remaining claims under § 20(a) and
§ 20A.
DISCUSSION
“We review the district court’s dismissal of a complaint de
novo.” Altimeo Asset Mgmt. v. Qihoo 360 Tech. Co., 19 F.4th 145, 149 (2d

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Cir. 2021). The SAC contained four counts. Counts I and III alleged
that the defendants are liable for false or misleading statements in
violation of § 10(b) of the Exchange Act and SEC Rule 10b-5. Count II
alleged that Foley, Lynch, and Woodworth violated § 20(a) of the
Exchange Act as controlling persons of Peloton when Peloton violated
§ 10(b). Count IV alleged that Cortese, Foley, Lynch, Woodworth,
Garavaglia, and Kushi traded Peloton securities while in possession
of inside information in violation of § 20A of the Exchange Act. The
district court dismissed the SAC in its entirety. We address each count
in turn.
I
Section 10(b) of the Exchange Act provides that it is unlawful
“[t]o use or employ, in connection with the purchase or sale of any
security registered on a national securities exchange or any security
not so registered, … any manipulative or deceptive device.” 15 U.S.C.
§ 78j(b). Rule 10b-5 implements the statute by making it unlawful
“[t]o make any untrue statement of a material fact or to omit to state
a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not
misleading, … in connection with the purchase or sale of any
security.” 17 C.F.R. § 240.10b-5. The plaintiffs alleged that the
defendants’ statements about demand and inventory violated these
provisions.
“To state a claim for relief under § 10(b) and Rule 10b-5, ‘a
plaintiff must allege that the defendant (1) made misstatements or
omissions of material fact, (2) with scienter, (3) in connection with the
purchase or sale of securities, (4) upon which the plaintiff relied, and
(5) that the plaintiff’s reliance was the proximate cause of its injury.’”
Altimeo, 19 F.4th at 149-50 (quoting Setzer v. Omega Healthcare Invs.,

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Inc., 968 F.3d 204, 212 (2d Cir. 2020)). “In addition, because such a
claim sounds in fraud, the plaintiff ‘must state with particularity the
circumstances constituting fraud.’” Id. at 150 (quoting Fed. R. Civ. P.
9(b)). Under this heightened pleading standard, “plaintiffs must do
more than say that the statements … were false and misleading; they
must demonstrate with specificity why and how that is so.” Rombach
v. Chang, 355 F.3d 164, 174 (2d Cir. 2004).
Whether a statement is false or misleading is “evaluated not
only by literal truth, but by context and manner of presentation.”
Singh v. Cigna Corp., 918 F.3d 57, 63 (2d Cir. 2019) (internal quotation
marks omitted). “The test for whether a statement is materially
misleading under Section 10(b) … is ‘whether the defendants’
representations, taken together and in context, would have misled a
reasonable investor.’” Rombach, 355 F.3d at 172 n.7 (quoting I. Meyer
Pincus & Assocs. v. Oppenheimer & Co., 936 F.2d 759, 761 (2d Cir. 1991)).
“Similarly, for an alleged statement to be ‘material’ under
Section 10(b), we have held that it ‘must be sufficiently specific for an
investor to reasonably rely on that statement as a guarantee of some
concrete fact or outcome.’” Leadersel Innotech ESG v. Teladoc Health,
Inc., No. 23-1112, 2024 WL 4274362, at *2 (2d Cir. Sept. 24, 2024)
(alteration omitted) (quoting City of Pontiac Policemen’s & Firemen’s
Ret. Sys. v. UBS AG, 752 F.3d 173, 185 (2d Cir. 2014)). “[E]xpressions
of puffery and corporate optimism do not give rise to securities
violations.” Rombach, 355 F.3d at 174.
In this case, the district court held that the plaintiffs failed to
plausibly allege any material misrepresentation or omission by the
defendants. We agree with the district court that the following alleged
misstatements are not actionable: (1) Woodworth’s and Foley’s
statements during an earnings call on February 4, 2021, that demand
was “strong,” “robust,” and “not … softening,” App’x 680, 683;

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(2) Peloton’s statement in its Form 10-Q filed on May 7, 2021, about
an “increase in inventory levels” to meet “current increased
demand,” id. at 549; (3) Woodworth’s statement during an analyst
conference on May 25, 2021, that—as compared to May 2019—there
was still a “ton of demand,” id. at 836; (4) Woodworth’s and Foley’s
statements during an earnings call on August 26, 2021, that the
company was entering fiscal year 2022 with a “normalized backlog”
and had an “expectation of continued strong” and “robust” demand,
id. at 734, 738; (5) Foley’s statement during an earnings call on
November 4, 2021, that the company’s “inventories are healthy” for
the upcoming holiday season, id. at 787; and (6) Peloton’s risk
disclosure in its Form 10-Q filed on May 7, 2021, which warned of
potential financial consequences in the event of “excess inventory
levels,” id. at 564.
We reach a different conclusion as to the following alleged
misstatements: (1) Foley’s statement during an earnings call on
August 26, 2021, describing the company’s decision to reduce the
price of its bike by $400 as an “absolutely offensive” business strategy,
id. at 738; and (2) Peloton’s warning of hypothetical risks regarding
“excess inventory levels” in its Form 10-K and Form 10-Q filed on
August 26 and November 4, 2021, id. at 424; see also id. at 250-51
(¶ 214).1
1 These statements are included in those the district court numbered
Statements 14 and 20. See Robeco, 2024 WL 4362747, at *5.

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A
We first address the statements that are not actionable as a
matter of law.
1
During an earnings call on February 4, 2021, Foley stated: “We
are not seeing a softening of demand. That is absolutely not what’s
happening here. We are seeing incredibly strong organic demand.” App’x
680 (emphasis added). Woodworth added: “that’s reflected in the
revised revenue guidance that we’ve given for Q3 and Q4. … [W]e’re
still seeing very strong organic demand across all geographies across all
products.” Id. (emphasis added). Later in the call, Foley reiterated:
“We haven’t seen any softening of demand.” Id. at 683 (emphasis added).
The plaintiffs argue that these statements were false or
misleading because demand was not strong but declining. But the
plaintiffs failed to plead with particularity that demand had softened
by February 2021 when these statements were made. The SAC relied
primarily on confidential witness accounts, but these accounts were
inconsistent regarding when demand began to decline. Only one
confidential witness consistently reported decreased demand before
February 2021,2 while most placed the beginning of any decline in
demand in February, March, or later in 2021, after the statements were
made.3
2 See App’x 185 (¶ 34).
3 See App’x 183 (¶ 28) (CW1 stating that “at the end of February 2021 or in
March 2021, internal reports showed a significant softening of demand”);
id. at 186 (¶ 37) (CW3 stating that a “downturn in sales” started “by April
2021”); id. at 195 (¶ 70) (CW12 stating that sales “slowed down by June
2021”); id. at 197 (¶ 81) (CW16 stating that “deliveries slowed in February
or March of 2021”); id. at 198 (¶ 83) (“CW18 estimated that sales dropped

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Moreover, Woodworth explicitly tied her statement about
demand to Peloton’s revenue guidance, which predicted $1.1 billion
in quarterly revenue, representing 110 percent year-over-year
growth. The company not only met but exceeded this guidance,
achieving 141 percent year-over-year growth in the third quarter of
fiscal year 2021. Woodworth’s and Foley’s statements about “strong”
and “robust” demand were consistent with Peloton’s then-current
expectations of further growth, both quarter-over-quarter and year-
over-year. “[A]s long as the public statements are consistent with
reasonably available data, corporate officials need not present an
overly gloomy or cautious picture of current performance and future
prospects.” Novak v. Kasaks, 216 F.3d 300, 309 (2d Cir. 2000).
We agree with the district court that Woodworth’s and Foley’s
statements during the earnings call on February 4, 2021, were neither
false nor misleading when made.
2
In its Form 10-Q filed on May 7, 2021, Peloton reported “a
$363.7 million increase in inventory levels as we ramped up supply to
meet the current increased demand.” App’x 549 (emphasis added).
The plaintiffs argue that this statement was false or misleading
because it represented that Peloton had expanded its inventory to
respond to increased demand when in fact “inventory accumulated
off significantly beginning in February 2021.”); id. at 198-99 (¶ 84) (CW19
stating that “deliveries slowed” in “July 2021”); id. at 201 (¶ 90) (CW23
recalling that “business slowed down significantly” in “February of 2021”);
id. at 202 (¶ 94) (CW24 stating that “orders were slowing” in “August or
September 2021”); see also id. at 213 (¶ 132) (CW28 stating that “in December
2020, Peloton was still pretty busy”); id. at 203 (¶ 100) (CW27 describing
consistent sales from January to June 2021).

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because demand had declined.” Appellants’ Br. 27. The plaintiffs,
however, read the statement out of context. The inventory increase
described in the Form 10-Q referred to a specific year-over-year
comparison between the first three quarters of fiscal year 2021 and the
first three quarters of fiscal year 2020. Peloton explained that it had
ramped up its inventory “to meet the current increased demand”
compared to pre-pandemic levels—not compared to COVID peak
levels. Demand in the first three quarters of fiscal year 2021 was
indeed substantially higher than pre-COVID levels. Even if demand
declined sequentially from the COVID peak, as the plaintiffs alleged,
it remained above the pre-COVID baseline that formed the basis of
the comparison.
We agree with the district court that Peloton’s statement in the
May 2021 Form 10-Q regarding “current increased demand” was not
false or misleading about the period to which it referred.
3
During an analyst conference on May 25, 2021, in response to a
question from an analyst about “where bike demand is heading into
warmer weather and into strong reopening,” Woodworth stated: “we
all know that COVID was a little bit of an anomaly last year in terms
of sales.” App’x 836. She explained that the fourth quarter of fiscal
year 2021 was therefore not the “relevant” comparator; what
mattered was “Q4 of ‘19.” Id. Comparing “where we were in Q4 of ‘19
[to] where we expect to be in terms of bike in Q4 of this year … bike
sales or bike demand is still over 3x where it was a couple of years
ago, which when you look at that CAGR over a 2-year period, we still
see a ton of demand.” Id. (emphasis added).
This statement was not false or misleading because Woodworth
expressly acknowledged that COVID was an “anomaly” and framed

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her comparison against pre-COVID levels from 2019, not COVID
peak levels. The statement that demand was “still over 3x where it
was a couple of years ago” was factually true and consistent with
Peloton’s financial results. Likewise, it was factually true that, as
compared to May 2019, there was a “ton of demand” in May 2021.
The plaintiffs contend that Woodworth’s statement was
misleading because demand had significantly declined by May 2021,
as evidenced by nationwide failures to meet sales quotas. The
plaintiffs suggest that Woodworth’s use of the word “still” implied a
continuity of strong demand. Woodworth’s statement was expressly
comparative, however, because she focused on the “3x” growth over
a two-year period and the “CAGR over a 2-year period.” A reasonable
investor would have understood Woodworth’s statement to address
long-term growth trends rather than sequential quarter-over-quarter
changes. Cf. Hassan v. Bos. Beer Co., No. 23-8, 2023 WL 8110940, at *2-
3 (2d Cir. Nov. 22, 2023) (holding that a statement that the hard seltzer
industry will “now start to reaccelerate” was not misleading and
rejecting the argument that “now” meant “immediate reacceleration”
because the statement was in response to a question about “full year
growth”).
Moreover, during the May 6, 2021, earnings call that prompted
the analyst’s question, Woodworth disclosed that “sales have been
tapering from COVID highs, and we’re expecting a gradual return to
historical seasonal sales trends.” App’x 706. She reiterated that the
business was now “going to be seasonal,” id. at 836, and Peloton
announced a fourth quarter forecast less than its actual third quarter
revenue, acknowledging that demand would not increase quarterly
and would instead reflect seasonality, with lower sales in warmer
months. Woodworth’s statement during the analyst conference on
May 25, 2021, was consistent with this guidance.

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We agree with the district court that Woodworth’s statement
was not misleading because it used a pre-COVID comparator and
made no representations about sequential growth.
4
During an earnings call on August 26, 2021, Woodworth stated:
“For fiscal [year] 2022, we expect total revenue of $5.4 billion or 34%
year-over-year growth and a 72% two-year CAGR. Given our
significant manufacturing capacity and logistics investments during
the past year, we are entering fiscal [year] 2022 with a normalized
backlog for our Bike portfolio and guidance reflects our expectation of
continued strong demand.” Id. at 734 (emphasis added).
Woodworth’s statement regarding an “expectation of
continued strong demand” was not false or misleading because she
tied the statement to Peloton’s revenue guidance, which projected
$800 million for the first quarter of fiscal year 2022 and $5.4 billion for
the full fiscal year 2022. While the first quarter revenue guidance
represented a sequential decrease from the previous quarter’s results
of $937 million, it was consistent with Peloton’s disclosed
expectations of a return to seasonal patterns, with lower demand
during summer months. The first quarter and full-year guidance still
reflected year-over-year growth of 6 percent and 34 percent,
respectively. And Peloton ultimately met its first quarter guidance
with revenue of $805 million.
As for the “normalized backlog” portion of the statement,
Woodworth had announced earlier in the call that the company had
“made significant progress on product wait times with … order to
delivery windows at pre-pandemic levels.” Id. at 731. Read in context,
her statement referred to the improvement in order-to-delivery times,
not inventory levels. The statement was not misleading because it

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accurately reflected the company’s resolution of delivery delays that
had previously overwhelmed its operations.
We agree with the district court that Woodworth’s statement
regarding an “expectation of continued strong demand” was not
misleading in context because it was tied to guidance that Peloton
subsequently met, and the “normalized backlog” statement
accurately reflected the company’s improvement in delivery times.
5
During an earnings call on November 4, 2021, Foley stated:
“Looking ahead, we’re about to enter our busiest time of the year. Our
inventories are healthy and our logistics teams are well equipped for the
seasonally strong sales period.” Id. at 787 (emphasis added).
The plaintiffs argue that this statement was false or misleading
because Peloton’s inventories were not “healthy.” Instead, the
company “was buried in almost eighteen months’ worth of inventory
and had decided to halt production of its Bike and Bike+ to reduce
inventory levels.” Appellants’ Br. 15. Yet the plaintiffs ignore the
context of the statement. Foley’s reference to “healthy” inventories
was about Peloton’s readiness for the upcoming holiday season; Foley
said that Peloton had sufficient inventory to meet the anticipated
holiday demand without the delivery delays that the company
experienced during the prior holiday season. Supply-chain issues in
December 2020 had “forced [Peloton] to reschedule many deliveries.”
App’x 673. The November 2021 statement was not a representation
about overall inventory levels.
Foley explained that having “healthy” inventory and being
“well equipped” meant having “low expected [order-to-delivery
times] across our portfolio” because “delivery is greatly appreciated
during the holiday and New Year’s resolution periods.” Id. at 787.

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Peloton’s guidance for the second quarter of fiscal year 2022 predicted
$1.1-1.2 billion in revenue, and the company met this guidance with
actual revenue of $1.13 billion, demonstrating that its inventory levels
were appropriately aligned with projected holiday demand. A
reasonable investor would have understood Foley’s statement about
“healthy” inventory to refer to having sufficient stock to meet the
demands of the holiday season without delays, not as a
representation about the overall sustainability of Peloton’s inventory
levels beyond that season.
In addition, a reasonable investor would not have been misled
because the characterization of the inventories as “healthy” was the
type of expression of corporate optimism that we consider non-
actionable puffery. Cf. Teladoc, 2024 WL 4274362, at *3 (“These ‘vague
positive statements’ regarding the integration—including phrases
like ‘going really great,’ ‘continues to progress,’ ‘well on the way,’ and
‘on track’—are ‘too general to cause a reasonable investor to rely upon
them and therefore are precisely the type of puffery that this and
other circuits have consistently held to be inactionable.’”) (alterations
omitted) (quoting In re Synchrony Fin. Sec. Litig., 988 F.3d 157, 170 (2d
Cir. 2021)); see also Kleinman v. Elan Corp., 706 F.3d 145, 153 (2d Cir.
2013) (explaining that a word such as “encouraging” reflects
inactionable puffery and optimism).
We agree with the district court that Foley’s statement
regarding “healthy” inventories was not false or misleading in
context.

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B
We now turn to the statements that are plausibly actionable.
1
During the earnings call on August 26, 2021, in response to an
analyst’s question about whether the bike price reduction was
“offensive or defensive,” Foley stated: “we feel like the demand for
Bike+ and Bike is robust and we feel good about the entire year’s
forecast. The price drop with B1 was absolutely offensive. As we think
about the competitive landscape, we think about democratizing
access to great fitness, which is, as you know, always been in our
playbook.” App’x 737-38 (emphasis added).
While Foley’s assertion about “robust” demand was tied to
guidance that Peloton ultimately met, his characterization of the price
reduction as “absolutely offensive” rather than defensive was
plausibly false or misleading. The SAC alleged that the former senior
director of operations and supply-chain management stated that “the
August 2021 price reduction on the original Bike was an attempt to
increase sales because Peloton had so much excess inventory.” Id. at
184 (¶ 31). The SAC also alleged numerous statements from other
confidential witnesses who reported details about the company’s
inventory build-up. See, e.g., id. at 238-40 (¶ 189). According to the
SAC, by August 2021, Peloton had three months of excess inventory
sitting at shipping ports. See id. at 238 (¶ 189). These allegations
“present inconsistencies with [Foley’s] definitive statement[]” that the
price reduction was an offensive move to expand market share rather
than a defensive attempt to mitigate the losses from the excess
inventory. Teladoc, 2024 WL 4274362, at *4. We have explained that
such inconsistencies “cannot be resolved at this stage of the litigation,
when we must accept all factual claims in the complaint as true and

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draw all reasonable inferences in the plaintiff’s favor.” Id. (internal
quotation marks omitted); see also IWA Forest Indus. Pension Plan v.
Textron Inc., 14 F.4th 141, 147 (2d Cir. 2021) (holding that the district
court erred in dismissing claims based on the allegedly misleading
statements about a company’s progress in reducing inventory when
allegations from “a cadre of confidential informants” contradicted the
statements).4
We conclude that the district court erred by holding that the
SAC did not plausibly allege that Foley’s characterization of the price
reduction as “absolutely offensive” was false or misleading.
2
In its SEC filings of May 7, August 26, and November 4, 2021,
Peloton warned: “If we fail to accurately forecast consumer demand,
we may experience excess inventory levels or a shortage of products
available for sale. Inventory levels in excess of consumer demand may
result in inventory write-downs or write-offs and the sale of excess
4 The dissent concludes that Foley’s statement was neither false nor
misleading because the price reduction could have been both offensive and
defensive and “Foley did not say that the price … reduction was not
defensive.” Post at 3. We do not disagree that a strategy could be both
offensive and defensive. In this case, however, the analyst specifically asked
whether the price reduction was “offensive or defensive.” App’x 737. Foley
responded that it was “absolutely offensive,” which a reasonable investor
would understand as rejecting the suggestion that the reduction was
defensive. The dissent suggests that the analyst’s question “posed a false
choice.” Post at 4. Perhaps, but Foley did not say so. Because we are
deciding this appeal on a motion to dismiss, we must make inferences in
favor of the complaint, which alleged that confidential witnesses described
the price reduction as a direct response to excess inventory. The allegations
establish the plausible inference that Foley characterized the price
reduction as purely offensive and that the characterization was misleading.

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19
inventory at discounted prices, which would cause our gross margins
to suffer.” App’x 424 (emphasis added); id. at 564; see also id. at 250-51
(¶ 214).
We agree with the district court that the risk disclosure in the
Form 10-Q of May 2021 was not actionable. But the risk disclosures in
the Form 10-K and the Form 10-Q of August and November 2021 were
plausibly false or misleading. The SAC plausibly alleged that by
August 26, 2021, the specific financial consequences described in
these disclosures were not merely hypothetical “but had already
materialized and resulted in significant disruption to [Peloton’s]
business.” Teladoc, 2024 WL 4274362, at *5. The SAC alleged that
following the earnings call on August 26, 2021, Peloton reduced the
price of the original Bike by $400. See App’x 237 (¶ 187). According to
CW1, this reduced price was a direct response to Peloton’s “excess
inventory.” Id. at 184 (¶ 31). Moreover, on November 4, 2021, Peloton
disclosed that 91 percent of its inventory was unsold and reduced its
earnings guidance by approximately $1 billion. See id. at 178 (¶ 7); id.
at 252-53 (¶¶ 219-23). In other words, Peloton was already engaging
in “the sale of excess inventory at discounted prices.” Id. at 424.
Accepting the allegations as true, the presentation of the risk of
inventory write-downs and discounted sales as merely hypothetical
in the August Form 10-K and in the November Form 10-Q was
potentially misleading. We have previously explained that warnings
that hedging activity “could” or “may” impact the prices of notes
might have “possibly sufficed” when the notes were first issued, but
when the warnings remained unchanged after “market volatility
put[] to rest any uncertainty as to the price-impact,” those warnings
became actionable misstatements. Set Cap. LLC v. Credit Suisse Grp.
AG, 996 F.3d 64, 86 (2d Cir. 2021). The same logic applies here.

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20
We conclude that the district court erred by holding that the
SAC did not plausibly allege that the risks had already materialized
by the time of the August and November 2021 filings and rendered
the statements misleading.
C
The defendants argue in the alternative that the § 10(b) claims
should be dismissed because the SAC lacks factual allegations
providing a strong inference of scienter. The district court did not
consider this argument because it held that the SAC failed to
plausibly allege a material misstatement or omission. “‘Mindful that
we are a court of review, not of first view,’ we decline to consider
those arguments for the first time on appeal.” Hunter v. McMahon, 75
F.4th 62, 73 n.15 (2d Cir. 2023) (alteration omitted) (quoting Cutter v.
Wilkinson, 544 U.S. 709, 718 n.7 (2005)); see Eric M. Berman, P.C. v. City
of New York, 796 F.3d 171, 175 (2d Cir. 2015) (“[I]t is this Court’s usual
practice to allow the district court to address arguments in the first
instance.”) (quoting Dardana Ltd. v. Yuganskneftegaz, 317 F.3d 202, 208
(2d Cir. 2003)); see also Teladoc, 2024 WL 4274362, at *5 (declining to
address the issue of scienter in the first instance). On remand, the
district court may consider whether the plaintiffs have plausibly
alleged scienter with respect to Foley’s statement that “[t]he price
drop with B1 was absolutely offensive” on August 26, 2021, App’x
738, and Peloton’s risk warnings in the Form 10-K and Form 10-Q
filed on August 26 and November 4, 2021.
D
In sum, we conclude that the plaintiffs have plausibly alleged
actionable misstatements or omissions based on Foley’s statement
that “[t]he price drop with B1 was absolutely offensive” on August
26, 2021, and Peloton’s risk warnings in the Form 10-K and Form 10-Q

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21
filed on August 26 and November 4, 2021. We vacate the judgment of
the district court insofar as it dismissed the plaintiffs’ claims under
§ 10(b) and Rule 10b-5 based on these statements.
II
The plaintiffs also alleged control person liability under § 20(a)
of the Exchange Act. The district court dismissed the § 20(a) claims
because it decided that the plaintiffs had not plausibly alleged the
underlying claims under § 10(b) and Rule 10b-5.
“Section 20(a) of the Exchange Act provides that individual
executives, as ‘controlling persons’ of a company, are secondarily
liable for their company’s violations of the Exchange Act.” Emps.’ Ret.
Sys. of Gov’t of the Virgin Islands v. Blanford, 794 F.3d 297, 305 (2d Cir.
2015) (alteration omitted) (quoting 15 U.S.C. § 78t(a)). “Actions under
[§ 20(a)] require an independent violation of the Exchange Act.”
Altimeo, 19 F.4th at 152.
Because we conclude that the district court erred by dismissing
the claims under § 10(b) and Rule 10b-5 with respect to the three
plausibly actionable statements, we vacate the judgment of the
district court insofar as it dismissed the corresponding § 20(a) claims
with respect to those statements as well.5
CONCLUSION
We vacate the judgment of the district court insofar as it
dismissed the plaintiffs’ claims under § 10(b), Rule 10b-5, and § 20(a)
5 The SAC additionally asserted insider trading claims under § 20A of the
Exchange Act. On appeal, the plaintiffs do not raise any arguments
challenging the dismissal of those claims, which therefore “are waived.”
JP Morgan Chase Bank v. Altos Hornos de Mex., S.A. de C.V., 412 F.3d 418, 428
(2d Cir. 2005).

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22
with respect to the three plausibly actionable statements. We affirm
the judgment insofar as the district court dismissed the plaintiffs’
claims with respect to the other challenged statements. We remand
for further proceedings consistent with this opinion.

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1
Jon O. Newman, Circuit Judge, concurring in part and dissenting in part:
In this securities fraud class action brought by Plaintiffs-Appellants City of
Hialeah Employees’ Retirements System, et al. (“Hialeah”) against Peloton
Interactive, Inc., et al. (“Peloton”), the majority affirms the District Court’s
dismissal of Hialeah’s claims concerning six statements made by Peloton, but
remands for further consideration the claims concerning two statements. I agree
with affirmance of the dismissal of the claims concerning the six statements, but
disagree that the claims concerning the two remanded statements require any
further consideration. Those two statements, assessed in the context of the “total
mix,” Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44 (2011), of all the
information publicly disclosed by Peloton, could not be considered false or
misleading by reasonable investors. I therefore concur in part and respectfully
dissent in part.
The two statements to be remanded for further consideration are the
following:
Statement 14 (as numbered in the second amended complaint (“SAC”)).
Paragraph 187 of the SAC alleges that during an August 26, 2021, earnings call,
Peloton announced that the price of the Peloton Bike would be reduced by $400.

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2
John Foley, a Peloton employee, was asked, regarding the relationship of the price
drop to demand: “[I]s the Bike price gotten [sic] offensive or defensive?”1 (I am
willing to assume that “gotten” is a mistranscription for the word “reduction,”
although Hialeah’s briefs in this Court provide no clarification.) Foley replied,
“The price drop . . . was absolutely offensive.”2 The majority says that Foley’s
“characterization of the price reduction as ‘absolutely offensive’ rather than
defensive was plausibly false and misleading.” Ct. Op. 17.
Statement 20. Paragraph 214 of the SAC alleges that in Peloton’s Forms 10-Q
or 10-K, in a section titled “Risks Related to Our Business,” Defendants stated, “If
we fail to accurately forecast consumer demand, we may experience excess
inventory levels . . .”3 Paragraph 218 alleges that “Defendants misrepresented
verifiable facts―namely, they already had already had [sic] excess inventory by [the
dates of the 10-K].”4 The majority says that “the risk disclosures in the Form 10-K
and the Form 10-Q of August and November 2021 were plausibly false or
misleading,” Ct. Op. 18, because “when the warnings remained unchanged after
‘market volatility put[] to rest any uncertainty as to price-impact,’ those warnings
1 Joint Appendix (“JA”) 237.
2 Id.
3 Id. 76 (emphases in original).
4 Id.

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3
became actionable misstatements.” Ct. Op. 19 (quoting Set Capital LLC v. Credit
Suisse Group AG, 996 F.3d 64, 86 (2d Cir. 2021).”5
Statement 14 is neither false nor misleading. The price reduction was
”offensive,” as Foley said. It was offensive in the obvious sense that it was made
to increase sales. The majority does not deny the offensive nature of the price
reduction. Instead, the majority takes Foley’s response as a denial that the
reduction was defensive and a false denial at that.
First, Foley did not say that the price was reduction was not defensive. He
simply asserted that the statement was offensive, which it was. Furthermore, the
majority’s concern with Foley’s response ignores the obvious fact that a price
reduction inevitably serves both an offensive and a defensive purpose, unless
5 The majority’s quotation from Set Capital is accurate, but the facts of that case are so different from
the pending case as to make it weak support for any of Hialeah’s claims. Set Capital involved traders at
Credit Suisse who were secretly engaged in manipulative hedging that they knew would earn them profit
at the investors’ expense. Set Capital LLC, 996 F.3d at 86. Offering documents stating that Credit Suisse’s
hedging activity “could” or “may” impact the prices of certain notes was misleading because the traders
were secretly hedging in a way that they intended to create the warned-of impact. Id. In the pending case,
the Form 10-Qs warned that excess inventory may result in discounted sale prices and write downs. Then
the Defendants announced that 91% of inventory remained unsold resulting in a $1 billion decrease in
earnings projections. While Peloton did not update its Form 10-Q language, it did explicitly tell investors
that the warned-of risk had materialized, unlike the Credit Suisse traders in Set Capital who kept hidden
their plans to intentionally impact the price.

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4
production of new product is increased, which no one claims occurred in this case
as of August 2021.
When a price reduction succeeds in increasing sales (the offensive purpose),
it also reduces inventory (the defensive purpose).
In the circumstances of this case, the offensive and defensive purposes are
virtually two sides of the same coin. The question put to Foley posed a false choice.
Any reasonable investor, hearing that the price reduction was offensive would
understand that the reduction would also be defensive because Peloton would
reduce inventory (where else would the bikes come from?). That reasonable
investor would not regard Foley’s statement as false or misleading.
“[T]aken together and in context” with the publicly available numbers,
which is how statements are to be assessed, Rombach v. Chang, 355 F.3d 164, 172
n.7 (2d Cir. 2004), the “absolutely offensive” statement could not have misled a
reasonable investor. See Omnicare Inc. v. Laborers District Council Construction
Industry Pension Fund, 575 U.S. 175, 189-90 (2015) (investors are expected to filter
an opinion statement through “all its surrounding text, including hedges,
disclaimers, and apparently conflicting information,” and thus executives’
opinions are protected as long as they “fairly align with the information in the[ir]

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5
possession at the time”).The plaintiffs do not dispute that the inventory numbers
were disclosed in SEC filings and readily available.
Statement 20 is neither false nor misleading. The majority says that
statement 20 “became” false and misleading because the risks warned against had
already occurred. Ct. Op. 18-19. As the majority amplifies, “The SAC plausibly
alleged that by August 26, 2021, the specific financial consequences described in
these disclosures were not merely hypothetical ‘but had already materialized and
resulted in significant disruption to [Peloton’s] business.’” Ct. Op. 18.
The appellees make a substantial response to the claim with respect to
statement 20. First, Peloton explains that although it “did not warn of ‘excess’
inventory in the abstract – it warned of the specific potential financial consequences
of ‘excess’ inventory: write-downs, write-offs, sale at discounted margins, and a
decrease in gross margins.” (Br. for Appellees at 31) (emphasis added). And as
Peloton points out, “Plaintiffs do not allege . . . that any of those consequences [the
“might”-or-“could”-happen consequences] materialized during the Class Period.”
Id. at 31-32.
Plaintiffs’ only reply is that at the time of the risk warnings, Peloton already
had excess inventory levels that resulted in inventory payments and storage costs.

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6
(Reply Br. at 17). Yet those are not the consequences of which Peloton’s Form 10-Q
and 10-K warned. Neither Plaintiffs nor the majority respond to Peloton’s
legitimate assertion that the SAC lacks particularized allegations about the write-
downs, write-offs, sale at discounted prices, or a decrease in gross margins during
the class period.
Second, they point out that “Peloton disclosed its precise inventory in dollar
amounts, as well as Peloton’s precise financial condition. E.g., JA335 ($244.5
million in net inventory in June 2020; $552.8 million in December 2020); JA517
($614.2 million in net inventory in March 2021). Br. for Appellees at 32.
Of even greater significance, despite the November Form 10-Q in which a
statement was made that the majority asserts “became” misleading because the
potential risks had already occurred, Peloton disclosed in the Nov. 4, 2021,
earnings call that 91 percent of its inventory was unsold and the devastating news
that it had reduced its earnings guidance by $1 billion. No reasonable investor
could have regarded Form 10-Q as misleading when simultaneously apprised of
this $1 billion reduction. As the Supreme Court pointed out in Matrixx, the
question is “whether a reasonable investor would have viewed the nondisclosed

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7
information as having significantly altered the ‘total mix’ of information made
available.”6
District Judge Denise Cote recently dismissed claims alleging misleading
risk disclosure statements that were couched in hypothetical language because in
light of “robust disclosures, the risk factors identified in the prospectus were not
misleading.” In re UiPath, Inc. Securities Litigation, 755 F. Supp. 3d 498, 514
(S.D.N.Y. 2024).
A $1 billion reduction in projected earnings is certainly a robust disclosure
for a company of Peloton’s size.
In addition to the foregoing specific analysis of statements 14 and 20,
Peloton’s “revenue guidance” precluded the statements complained of in the SAC,
including statements 14 and 20, from misleading investors. Peloton regularly
disclosed “revenue guidance” (estimates of anticipated revenue) for time periods
that included the dates of statement 14 (August 26, 2021) and statement 20 (August
and November 2021). It is undisputed that Peloton‘s actual revenues exceeded its
6 Matrixx, 563 U.S. at 44 (emphases in original) (internal quotation from Basic Inc. v. Levinson, 485
U.S. 224, 232 (1988)).

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8
estimates for the third and fourth quarters of 2021 and the first and second quarters
of 2022. See Br. for Appellees at 21.
As Peloton contends, the revenue guidance was a proxy for expected
demand, and reasonable investors would not have been misled about demand
when the guidance disclosed that demand would decline to pre-Covid seasonal
trends, predictions that proved to be correct. Br. for Appellees at 19. Furthermore,
when announcing the decline in revenue guidance, Peloton explained that the
revision was necessary because of “reduction[s]” to Peloton’s “demand forecast.”
JA 790-91. Not only was the relationship between revenue guidance and demand
explained to investors, that relationship was understood. For example, when
Peloton issued the July-September 2021 revenue guidance, which was lower than
the previous quarter’s revenue, an analyst commented that the educed revenue
guidance “obviously . . . implies sequential decline” in the “trend in demand.” JA
745 (emphasis added).
The revenue guidance figures, which Peloton expected to be, and were,
understood as a proxy for demand, and which must be assessed in the total mix of
information disclosed, preclude any reasonable inference that Peloton’s
statements about demand were grounds for a securities fraud lawsuit.

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9
* * * * *
Fortunately, the Court does not remand statements 14 and 20 for trial or
consideration of a motion for summary judgment, but only for consideration of
issues not yet considered by the District Court, notably scienter. In my view, it is
highly unlikely that the plaintiffs’ pleading of scienter can survive the defendants’
motion to dismiss. So, although I dissent from the Court’s ruling that statements
14 and 20 were adequately pled to survive the motion to dismiss, I have a high
degree of confidence that the complaint will ultimately be dismissed for lack of an
adequate pleading of scienter and that the heavy pressure often felt to settle a class
action securities fraud case will not yield a monetary recovery for the class in this
case.7
7 The Supreme Court has observed that the PSLRA was enacted to curb the “extraction of
extortionate settlements of frivolous claims” by imposing heightened pleading requirements and caps on
attorneys’ fees to curb use of strike suits by plaintiffs’ lawyers. See Amgen Inc. v. Connecticut Retirement
Plans and Trust Funds, 568 U.S. 455, 475-76 (2013) (citation omitted). Our colleague, Judge Richard C.
Wesley, “has noted the pressures upon corporate defendants to settle securities fraud ‘strike suits’ when
those settlements are driven, not by the merits of plaintiffs' claims, but by defendants’ fears of potentially
astronomical attorneys' fees arising from lengthy discovery.” Bondi v. Capital & Finance Asset Management
S.A., 535 F.3d 87, 97 (2d Cir. 2008) (Wesley, J., dissenting) (citations omitted).
One commentator reports that adjudication of securities class actions has been “zealously
avoided” in favor of settlements that “do not reflect the merits.” Janet Cooper Alexander, Do the Merits
Matter? A Study of Settlements in Securities Class Actions, 43 S TAN . L. REV. 497, 596-97 (1991); see also Joseph
A. Grundfest, Disimplying Private Rights of Action Under the Federal Securities Laws: The Commission’s
Authority, 107 HARV. L. REV. 961, 972 n.38 (1994). Another commentator has decried the problem in
securities class actions whereby “[p]laintiffs’ attorneys are able to generate attorneys’ fees by initiating or
maintaining strike suits.” Elliot J. Weiss & John S. Beckerman, Let the Money do the Monitoring: How
Institutional Investors Can Reduce Agency Costs in Securities Class Actions, 104 YALE L. J. 2053, 2084-88 (1995).

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