A California federal court has refused to fully dismiss a proposed securities fraud class action against e.l.f. Beauty, Inc., allowing a narrow set of claims tied to statements made by the company’s chief executive to proceed. In a newly issued order, a California federal judge granted in part and denied in part the defendants’ motion to dismiss, finding that the investor plaintiffs plausibly alleged securities fraud violations based on statements made by e.l.f.’s CEO during a 2024 TV appearance. The court dismissed all remaining challenged statements, including all claims against the company’s finance chief.
The Background in Brief: Investors filed suit against e.l.f. Beauty, CEO Tarang Amin, and the company’s CFO in March 2025. The case arose after a series of late-2024 disclosures and public statements, including statements responding to a critical research report by short seller Muddy Waters. The plaintiffs allege that e.l.f. misled investors about consumer demand at a time when internal data showed slowing sales and rising inventory. Central to the plaintiff’s case is e.l.f.’s alleged reliance on “untracked channels,” including Ulta Beauty, which deprives investors of visibility into whether rising inventory reflected strong demand or weakening consumer sales.
In furtherance of their Section 10(b) of the Securities Exchange Act and Rule 10b-5 claims, the plaintiffs also cited confidential witnesses to allege that internal data showed declining demand by mid-to-late 2024 and that Amin was aware of those trends.
Oakland, California-headquartered e.l.f. and the individual defendants sought to sidestep the case on the basis that the complaint relies on hindsight and fails to plead falsity, scienter, or loss causation.
Court Keeps Narrow Securities Fraud Claims
In an order on February 4, Judge Eumi K. Lee of the U.S. District Court for the Northern District of California sided with e.l.f. in substantial part. The court held that most of the e.l.f. statements challenged by the plaintiffs – including statements made earlier in 2024, statements describing historical financial results, and generalized expressions of confidence and growth – are not actionable. She emphasized that vague statements touting company strength, confidence, or growth prospects constitute inactionable puffery and that inventory buildup, alone, is not inconsistent with lawful business conduct.
The court dismissed all claims against e.l.f.’s CFO, Mandy Fields, concluding that the complaint did not allege facts sufficient to support a strong inference that she acted with the requisite intent to deceive or mislead investors. However, it reached a different conclusion with respect to a narrow set of statements made by Amin during a November 2024 appearance on CNBC’s Mad Money, which aired the day after Muddy Waters published a report asserting that e.l.f.’s inventory growth was driven by insufficient sales rather than strong demand.
During the interview, Amin stated that e.l.f. had built inventory to meet “strong demand” and characterized the company’s business with Ulta as “strong.” In context, the court held, those statements could plausibly mislead investors if Amin knew at the time that inventory was increasing because demand was weakening, particularly given the lack of publicly available sales data for key retail partners. The court emphasized that the statements were made in direct response to market criticism and were intended to alleviate investor concerns, heightening their potential to mislead. The court concluded that plaintiffs adequately pleaded scienter as to Amin, citing allegations that he attended monthly internal forecast meetings where declining sales trends and excess inventory were discussed.
Judge Lee further determined that plaintiffs plausibly alleged loss causation, pointing to a February 6, 2025 disclosure in which e.l.f. announced that net sales growth for the fiscal year would be negative, citing, in part, “softness in Ulta.” Following that disclosure, e.l.f.’s stock price declined by approximately 19.6 percent, according to the complaint.
While the ruling significantly narrows the scope of the case, it leaves e.l.f. and its CEO exposed to continued litigation tied to the November 2024 statements. Plaintiffs have been granted leave to amend their complaint, though the court cautioned that the existing pleading is already excessively long.
THE BOTTOM LINE: The decision makes clear that while generalized optimism remains protected, context-specific rebuttals to market criticism – particularly where underlying sales data is opaque – may carry heightened securities risk.
The case is In re e.l.f. Beauty, Inc. Securities Litigation, 5:25-cv-02316 (N.D. Cal.)
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