NEW YORK (Legal Newsline) - Two counts of a securities class action against a company that provides infrastructure for data centers should proceed, a U.S. magistrate judge has recommended.
New York magistrate judge Ona Wang issued her report and recommendations Nov. 6 in the lawsuit, brought by investors over Vertiv Holdings' stock drop that occurred in February 2022. The firms Bernstein Litowitz and Saxena White are lead counsel and represent several public pension funds that are lead plaintiffs.
Wang says the plaintiffs' Exchange Act claims should be allowed to proceed past a motion to dismiss, though she tossed claims under sections 11, 12 and 15 of the Securities Act against underwriters and company officers.
Vertiv argued none of the officer defendants sold shares or exercised options at the time Vertiv's stock was allegedly inflated.
"Even if Plaintiffs cannot succeed on a motive and opportunity theory, the circumstantial allegations in Plaintiffs' complaint sufficiently indicate conscious misbehavior on the part of the defendants," Wang wrote.
"Defendants' own representations, as well as reports of former employees, strongly indicate that Defendants had up-to-date knowledge of pricing data and were approving large discounts through the Class Period."
The funds say they lost money when the value of Vertiv stock dropped after the company admitted its adjusted operating income was 43% below the low end of its guidance range. The stock value dropped 37%.
The class period for shareholders is Feb. 24, 2021, to Feb. 22, 2022. The company designs, manufactures and services "critical digital infrastructure technologies and life cycle services for data centers, communication networks and commercial and industrial environments."
During a secondary public offering, the company "touted its robust pricing capabilities," the lawsuit says. It sold 20 million shares at $24.83 per, making close to $500 million.
"Contrary to the company's representations, however, Vertiv's 'pricing initiatives' were ineffective and the company's sales force was not capable of driving higher pricing and passing costs on to customers," one of the suits claims.
"Instead, the sales team had resorted to discounting in order to drive sales and build the company's backlog, which resulted in lower margins and profitability."