IN RE MOBILEYE GLOBAL SECURITIES LITIGATION

Background

Investors filed a proposed securities class action against Mobileye Global Inc. and several current and former executives. The lead plaintiff was The Retirement Plan for Chicago Transit Authority Employees; Oklahoma Firefighters Pension and Retirement System was also named as a plaintiff. The investors alleged that Mobileye used annual minimum-purchase contracts with some major customers to ship more EyeQ chips than customers actually needed. They characterized this practice as a channel-stuffing scheme that inflated reported revenue and Mobileye’s stock price.

The alleged class period ran from January 26, 2023, through August 1, 2024. Mobileye’s stock price declined after the company disclosed in January 2024 that customers had excess inventory and expected a major first-quarter revenue decline, and again after an August 2024 revenue-guidance reduction. The complaint relied on statements in Securities and Exchange Commission filings, earnings calls, conferences, and offering documents.

Claims and motion

The second amended complaint asserted claims under Section 10(b) of the Securities Exchange Act and Rule 10b-5, which prohibit material misrepresentations, omissions, and certain deceptive conduct connected with securities transactions. It also asserted control-person liability under Section 20(a) of the Exchange Act and claims under Section 11 of the Securities Act concerning Mobileye’s June 2023 secondary offering.

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). That rule asks whether the complaint alleges enough facts to state a legally plausible claim. For purposes of the motion, the court accepted the complaint’s factual allegations as true and drew reasonable inferences for the lead plaintiff.

Court’s reasoning

The court held that the complaint did not adequately allege a material misstatement or deceptive conduct under Section 10(b) and Rule 10b-5. The court concluded that Mobileye had disclosed that its three largest Tier 1 customers had minimum-purchase commitments and had repeatedly warned that customers might use accumulated inventory before placing new orders. Those disclosures, viewed in context, did not create the misleading impression alleged by the lead plaintiff.

The court also rejected the challenge to Mobileye’s revenue statements. The lead plaintiff did not claim that Mobileye’s reported revenue figures were inaccurate. The court found that the complaint did not plausibly show that technically accurate statements about revenue growth, volume, or average selling prices became misleading through their context. It also found that certain statements about future production schedules were either not shown to be false or were protected forward-looking statements accompanied by adequate warnings.

The court rejected the market-share theory because the complaint did not plausibly allege that Mobileye’s stated market share was false, that the company did not honestly hold the expressed opinion, or that the alleged inventory practices inflated market share by the same amount as sales. The court likewise found that the January 2024 statement that “much” of the excess inventory resulted from supply-chain constraints and lower-than-expected vehicle production was not plausibly shown to be false. The disclosed contracts could have contributed to excess inventory without making that statement misleading.

The court separately ruled that the complaint did not state a scheme-liability claim under Rule 10b-5(a) or (c). Entering annual minimum-purchase contracts was a lawful business practice, the court said, and the contracts and Mobileye’s market position had been publicly disclosed. The complaint did not allege deceptive conduct beyond the challenged statements and omissions.

Because the complaint did not allege a primary violation of Section 10(b) and Rule 10b-5, the control-person claims under Section 20(a) also failed. The Section 11 claims failed as well. The court found no adequately pleaded misstatement and concluded that Mobileye’s offering documents incorporated disclosures about the contracts, customer inventory, supply-chain constraints, and risks to future revenue. Those disclosures provided sufficient warning of the risks alleged by the lead plaintiff.

Disposition

Judge Cote granted the defendants’ December 20, 2024 motion to dismiss. The opinion states that the Section 10(b) claims, control-person claims, and Section 11 claims failed, and the court ordered the Clerk of Court to enter judgment for the defendants and close the case. The opinion does not state that the dismissal was with or without prejudice.