Ninth Circuit Revives Part of Investor Suit Against Funko, Inc.

On February 4, 2026, the Ninth Circuit filed its opinion to revive portions of the investors suit against Funko Inc.[1]

Funko is a toy/collectible maker that holds “the world’s largest selection of pop culture licenses.”[2] Investors commenced the 10b-5 suit against Funko after the stock lost over half its value when news broke the company wrote off “dead inventory” at a loss of tens of millions of dollars. The district court tossed the investor’s entire suit, finding the investors failed to sufficiently allege falsity and scienter for any of the alleged false and misleading statements. However, the Ninth Circuit disagreed with the district court on certain statements.

The Ninth Circuit determined Funko’s risk disclosures in its SEC filings for inventory management and its information technology system were not forward-looking protected by the PSLRA’s safe harbor, reversing the district court’s findings. The opinion explains, “where a statement about the future is in the form of a warning about a risk that might hurt business in the future, the statement implicitly serves as a comment on the present state of affairs, because it suggests that the circumstance posing the risk has not yet occurred.” In addition to finding falsity, the opinion also reverses the district court as to scienter for those statements. The decision emphasizes the importance of full disclosure to investors when risks are no longer hypothetical.

While the dismissal of all other statements was affirmed, the revived portions will return to the district court for further proceedings.

[1] https://www.bloomberglaw.com/product/blaw/bloomberglawnews/securities-law/X9GP4L0K000000

[2] https://funko.com/funko-about-us/funko-about-us-landing.html