In re Vicor Securities Litigation

Background

A proposed class of short-sellers sued Vicor Corporation and Patrizio Vinciarelli, whom the opinion identifies as Vicor’s founder and chief executive officer. Plaintiffs alleged that Vicor and Vinciarelli made misleading statements in July 2023 about an artificial-intelligence platform using a 4G chipset, an expected fourth-quarter production ramp, and an existing significant customer. According to the complaint, those statements contributed to a sharp increase in Vicor’s stock price, forcing the short-sellers to cover their positions at losses. Plaintiffs alleged that later statements caused the stock price to fall and revealed that the July statements had been misleading.

Plaintiffs asserted a claim under Section 10(b) of the Securities Exchange Act and Rule 10b-5(b), and a separate Section 20(a) control-person claim against Vinciarelli. Defendants moved to dismiss, arguing that the complaint did not adequately plead a false or misleading statement, the required state of mind known as scienter, reliance, or a viable control-person claim.

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

The court held that the complaint did not plausibly allege a material misrepresentation or omission. It rejected plaintiffs’ characterization of the statements as communicating that Vicor had a concrete contract or firm deal. The court read the statements as saying that Vicor expected a fourth-quarter ramp based on customer input and that the opportunity involved an existing, significant customer.

The court also held that the statements were forward-looking. They concerned a future fourth-quarter ramp and used words such as “expect” and “anticipate.” Vicor’s press release and earnings call included cautionary statements warning that forward-looking statements might not prove correct and that actual results could differ. The court concluded that the complaint did not plausibly show that the statements were false when made or that Vicor omitted material information about them.

The court separately held that plaintiffs did not plead scienter with the particularity required by the Private Securities Litigation Reform Act. The complaint did not identify specific facts, documents, reports, or sources showing that defendants had information contradicting the July statements. The court also rejected the argument that the later failure of the expected ramp established that the earlier statements were false or recklessly made; the allegations were at least equally consistent with the possibility that the statements were true when made and circumstances later changed. The court further stated that scienter could not be inferred solely from Vinciarelli’s position or his signing of financial statements.

Because the court found that the complaint failed to plead both a material misrepresentation and scienter, it did not reach whether the short-sellers adequately alleged reliance. The opinion notes that plaintiffs asserted both a market-based theory of reliance for the proposed class and direct reliance by the named plaintiffs, but the court did not decide whether those theories were sufficient.

Section 20(a) control-person claim

The court held that the control-person claim against Vinciarelli failed because plaintiffs had not plausibly pleaded the required underlying violation of federal securities law. The control-person claim therefore failed in parallel with the Section 10(b) and Rule 10b-5 claim.

Disposition

The court granted defendants’ motion to dismiss and dismissed the operative complaint with leave to amend.