MercoPress. South Atlantic News Agency

New York court rules in favor of Uruguayan fintech dLocal, dismisses investor class action

dLocal, founded in Uruguay, specializes in processing payments in emerging markets and listed on the Nasdaq in June 2021

The Appellate Division of the New York State Supreme Court unanimously upheld the dismissal of a class action lawsuit filed by investors against Uruguayan fintech dLocal and the investment banks involved in its 2021 initial public offering, finding no material omissions in the information the company disclosed before the IPO.

The lawsuit, filed in 2023 by law firm Bragar Eagel & Squire on behalf of investors who purchased shares in the June 2021 IPO, centered on alleged omissions in the prospectus, particularly regarding an expected decline in the company's commission margins. The plaintiffs argued that when “the truth” about the company's projections emerged, shares plunged more than 50%, causing losses of “hundreds of millions of dollars” for investors.

However, the court concluded the plaintiffs failed to demonstrate that dLocal or its executives had actual knowledge of that risk at the time of the offering. The judges noted that available information showed sustained growth in key metrics including total payment volume, revenue and gross profit, both before and after the IPO.

The ruling also rejected the claim that a “material trend” existed that would have required the company to disclose more data to investors. The migration toward local payments — which generate lower per-transaction commissions but higher volume — had already been explained in the prospectus and was part of the company's growth strategy, the court determined. Even if that transition implied a reduction in commission rates, the judges found it was not a sufficiently significant factor to materially alter an investor's assessment.

Pedro Arnt, dLocal's CEO, said in a statement that the decision “recognizes the strength of the information disclosed by the company” in the period leading up to its listing on the New York Stock Exchange. “We remain focused on executing our strategy and generating value for our merchants, shareholders and the communities we serve in emerging markets, and not on the distractions created by inaccurate allegations,” he added.

dLocal, founded in Uruguay, specializes in processing payments in emerging markets and listed on the Nasdaq in June 2021 in one of the most prominent IPOs by a Latin American fintech company in recent years. The company operates in more than 40 countries and processes payments for global merchants that need to collect and pay in local currencies across emerging markets.

The unanimous appellate confirmation closes the legal chapter that had hung over the company since 2023 and clears one of the main uncertainties facing its shareholders in the US market.