IN RE IDEANOMICS, INC. SECURITIES LITIGATION

Background

The opinion concerns two securities-fraud class actions against Ideanomics, Inc., Alfred Poor, Bruno Wu, and Conor McCarthy. The plaintiffs alleged that the defendants made materially false or misleading statements about Ideanomics’ electric-vehicle business, causing the company’s stock price to decline after corrective disclosures.

Gary Sons, Rene Aghajanian, and Avraham Bitran each moved for appointment as lead plaintiff and for approval of their selected lead counsel. The lead plaintiff is the investor chosen to direct the litigation on behalf of the proposed class under the Private Securities Litigation Reform Act. The court considered the motions together.

Sons’s Motion

The court held that Sons qualified for a rebuttable presumption that he was the most adequate lead plaintiff. He timely moved for appointment, appeared to have the largest financial interest, and made a preliminary showing that his claims were typical of the proposed class and that he could fairly and adequately represent it.

Sons claimed that he purchased 350,000 shares during the class period and suffered a loss of $357,396.04. Aghajanian argued that Sons faced a unique defense because he bought all of his shares after the June 25, 2020 partial corrective disclosures but before the June 26, 2020 final corrective disclosure. The argument was that this timing could undermine Sons’s ability to rely on the fraud-on-the-market presumption of reliance.

The court agreed that Sons might face this unique defense. It also stated that if defendants later succeeded in challenging Sons as class representative or opposing class certification based on that defense, the proposed class could face statute-of-repose concerns. Because another suitable movant was available, the court concluded that Aghajanian had rebutted the presumption favoring Sons. The court therefore denied Sons’s motion for appointment as lead plaintiff and lead counsel.

Aghajanian’s Motion

The court granted Aghajanian’s motion for appointment as lead plaintiff. It found that he timely moved, had the largest financial interest among the remaining movants, and made the required preliminary showing of typicality and adequacy under Rule 23 of the Federal Rules of Civil Procedure.

Aghajanian claimed that he spent $178,176.40 to purchase 50,000 shares before the June 25 disclosures and suffered a loss of $105,176. The court found that this was a larger financial loss than Bitran’s stated loss of $93,229, using June 26 as the starting date for the 90-day damages lookback period. The court also found that Aghajanian had selected experienced counsel, had no known conflict with other proposed class members, and had sufficient financial losses to prosecute the case vigorously.

Lead Counsel

The court approved Aghajanian’s selection of Kessler Topaz Meltzer & Check, LLP as lead counsel. It found that the firm had extensive securities-litigation experience, had successfully prosecuted numerous securities-fraud class actions, and was qualified and able to conduct the litigation.

Disposition

The court denied Gary Sons’s and Avraham Bitran’s motions for appointment as lead plaintiff and lead counsel. It granted Rene Aghajanian’s motion for appointment as lead plaintiff and approval of his selection of lead counsel.