IN RE MOBILEYE GLOBAL SECURITIES LITIGATION

Background

Investors brought a proposed securities class action against Mobileye Global Inc. and several current and former executives: Amnon Shashua, Moran Shemesh Rojansky, Anat Heller, and Daniel Galves. The lead plaintiff alleged that the defendants misled investors about a purported “channel-stuffing” scheme involving annual minimum-purchase contracts with some Tier 1 customers, including Mobileye’s three largest customers.

The complaint alleged that these contracts required customers to buy minimum numbers of EyeQ chips even when actual demand was lower. According to the complaint, the resulting excess inventory allowed Mobileye to report inflated revenue and supported its June 2023 secondary stock offering. The lead plaintiff alleged that Mobileye later disclosed excess inventory and reduced revenue expectations in January and August 2024, causing declines in the stock price.

The Second Amended Complaint asserted claims under Section 10(b) of the Securities Exchange Act and Rule 10b-5, including misstatement and scheme-liability theories; control-person liability under Section 20(a) of the Exchange Act; and Section 11 claims under the Securities Act based on the secondary offering’s registration materials. The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint plausibly states a legal claim.

Section 10(b) and Rule 10b-5 claims

The court held that the complaint did not plead a material misstatement or deceptive conduct with the particularity required by the Private Securities Litigation Reform Act and Federal Rule of Civil Procedure 9(b). Because the complaint failed at that point, the court did not need to decide whether it adequately pleaded fraudulent intent, known as scienter, or loss causation.

The court rejected the lead plaintiff’s four principal theories:

1. Minimum-commitment contracts. The court found that Mobileye had disclosed both that it generally did not use contracts requiring particular purchase quantities and that some customers—including its three largest Tier 1 customers—had committed to minimum purchases. Mobileye had also repeatedly warned that customers might use accumulated inventory before placing new orders. The court concluded that the lead plaintiff had selectively relied on isolated words and had not read the disclosures as a whole.

2. Revenue statements. The lead plaintiff did not allege that Mobileye’s reported revenue figures were inaccurate. The court found that the company’s disclosures about revenue growth, volume, and average selling prices were not plausibly misleading when read together with the disclosures about the contracts, supply-chain conditions, and possible future effects of customer inventory. The court also rejected an argument based on analysts’ surprise after the January 2024 disclosure, explaining that later disappointment did not make earlier revenue reports misleading.

3. Market-share statements. The court found that the complaint did not plausibly allege that Mobileye’s statements estimating its advanced driver-assistance-systems market share at about 70% were false or misleading. It also found no adequate basis for the lead plaintiff’s assumption that allegedly inflated sales figures necessarily inflated market share by the same percentage. A later statement that excess inventory might cause a small market-share adjustment was not an admission that earlier market-share estimates were false.

4. The January 2024 excess-inventory disclosure. The court rejected the claim that Mobileye misled investors by stating that “much” of the excess inventory resulted from supply-chain constraints, customers’ desire to avoid shortages, and lower-than-expected production by certain original-equipment manufacturers. The court found that the company had disclosed the contracts, that the contracts were connected to supply-chain uncertainty, and that the complaint gave no sufficient reason to doubt the company’s description of its understanding of the inventory’s causes.

The court separately rejected the scheme-liability claims under Rule 10b-5(a) and (c). It held that entering into and enforcing disclosed, lawful minimum-purchase contracts was not, without additional deceptive conduct, enough to constitute a scheme to defraud. The court also held that the Section 20(a) control-person claims failed because they depended on an underlying Section 10(b) violation that had not been adequately pleaded.

Section 11 claims

The court also held that the Section 11 claims based on Mobileye’s June 2023 secondary offering failed even under the ordinary pleading standard. The alleged misstatements had already been rejected. As to alleged omissions under Items 303 and 105 of Regulation S-K, the court found that Mobileye’s offering documents incorporated disclosures about the minimum-purchase contracts, the possibility that customers would use accumulated inventory, uncertainty in future purchases, and limits on revenue growth. Those disclosures provided sufficient warnings about the alleged risks. The court also stated that Section 11 disclosure obligations are evaluated based on what was known when the offering documents were filed, not on later events or knowledge.

Disposition

The court granted the defendants’ December 20, 2024 motion to dismiss. It directed the Clerk of Court to enter judgment for the defendants and close the case. The opinion does not specify whether the dismissal was with or without prejudice.