New York appellate court victory for dLocal in securities litigation

On April 16, 2026, Davis Polk secured a unanimous affirmance on appeal of a March 2025 decision dismissing in full a putative securities class action arising out of the initial public offering of dLocal Limited. The case is captioned In re: DLocal Securities Litigation, No. 2025-02564 (1st Dep’t).

Founded in 2016, dLocal is a Uruguay-based fintech company that offers online payment processing services in emerging markets. Among other things, dLocal operates a proprietary, cloud-based platform that allows global enterprise merchants to receive online payments from customers and to make online payments to local vendors, employees and contractors in a safe and efficient manner. The company completed its IPO in June 2021. In November 2022, it was targeted in a short seller report by Muddy Waters Capital LLC, which purported to reveal various “lies” in dLocal’s public statements, including its IPO offering materials. Several plaintiffs’ firms filed lawsuits on the basis of the Muddy Waters report in early to mid-2023, with two ultimately consolidated in New York State Supreme Court, Commercial Division, before the Honorable Andrea Masley. (A third remains pending in U.S. District Court for the Eastern District of New York.)

The plaintiffs’ amended complaint asserted claims under section 11 and section 15 of the Securities Act of 1933 based on supposed misstatements or omissions in the IPO offering materials, each originally identified in some form by Muddy Waters. Among other allegations, plaintiffs claimed that dLocal was concealing a trend in the lead-up to the IPO of declining “take rates” – a non-GAAP metric that dLocal did not report at the time of the IPO but discussed in post-IPO statements, which supposedly measures the proportion of the company’s TPV actually earned as revenue or profit – purportedly driven by an undisclosed decision to focus on lower-margin “local-to-local” (as opposed to “cross-border”) payment transactions.

Davis Polk filed a motion to dismiss in July 2023. 

Justice Masley heard oral argument on February 29, 2024, and, on March 19, 2025, issued a decision and order granting the motion to dismiss as to all moving defendants, including dLocal and the IPO underwriters. Regarding take rates, Justice Masley held that, even assuming dLocal was experiencing a trend of declines in the lead-up to the IPO, the plaintiffs had failed to provide facts supporting an inference that the company both was actually aware of the declines in real time and knew that they would materially impact overall performance going forward, noting that allegations as to post-IPO management discussions concerning take rates were legally insufficient.

The plaintiffs appealed Justice Masley’s order as to the take rates issue. The Appellate Division, First Department heard oral argument on March 25, 2026. On April 16, 2026, the court issued a Decision and Order unanimously affirming in full. In a thorough decision adopting many of Davis Polk’s arguments, the court concluded that plaintiffs had failed to identify a duty to disclose additional information regarding take rates. The court first determined that because dLocal had undisputedly reported accurate results reflecting growth in TPV, revenue and profit both before and after dLocal’s IPO, it could not reasonably infer that the defendants knew that any declines in take rates would make an IPO investment “speculative or risky” within the meaning of Item 105 of SEC Regulation S-K. 

It also found that dLocal affirmatively disclosed substantial information regarding the business dynamics supposedly driving the alleged declines in take rates and, to the extent dLocal did not specifically report TPV (and, by extension, take rates) on a quarterly basis during certain quarters leading up to the IPO, any subsequent take rate declines comprised a “limited amount of data, showing only a few months” and “d[id] not constitute a known material trend that existed at the time of the offering” for purposes of Item 303 of Regulation S-K. 

Going further, the court specifically “reject[ed] plaintiffs’ contention that that dLocal management considered take rates to be a material performance metric, as discussed at quarterly sales calls after the IPO occurred,” finding that the “actual statements made on the earnings calls d[id] not support this allegation.” It also opined on materiality, concluding that “even if a decline in the take rate were a known trend, the consistent increase in TPV collections, revenue, and gross profits shows that the take rate decline, attributable to the disclosed transition to more local-to-local business, is ‘so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance.’”

The Davis Polk team included partner Antonio J. Perez-Marques (who argued the appeal), counsel Craig J. Bergman and Vincent Barredo and associates Allie (Allison) Siesser, Brett Klein and Meredith Bohen. Members of the Davis Polk team are based in the New York and Northern California offices.