IN RE: EHANG HOLDINGS LTD. SECURITIES LITIGATION

Background

The court considered three proposed securities-fraud class actions against EHang Holdings Limited, Huazhi Hu, Richard Jian Liu, and Edward Huaxiang Xu. The complaints alleged that the defendants made materially false and misleading statements about EHang’s business and the prospects of its autonomous aerial vehicle technology platform. The complaints asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

The plaintiffs alleged that Wolfpack Research published a report on February 16, 2021, criticizing EHang’s revenues, sales contracts, press releases, and legal situation. They alleged that EHang’s stock price fell from $124.09 at the February 12 close to $46.30 at the February 16 close.

Consolidation

The court consolidated Amberber v. EHang Holdings Limited et al., Chaumont v. EHang Holdings Limited et al., and Ran Klein v. EHang Holdings Limited et al. The court found that the actions presented substantially identical questions of law and fact because they concerned the same alleged statements, the same Wolfpack report, the same class period, the same statutory claims, and the same defendants.

The consolidated cases were designated In re: EHang Holding Ltd. Securities Litigation, No. 21 Civ. 1392 (GBD). The court also ordered that other similarly related EHang class actions filed in or transferred to the Southern District of New York would be consolidated unless the court ordered otherwise.

Lead Plaintiff

Under the Private Securities Litigation Reform Act, the person with the largest financial interest who also satisfies the relevant requirements of Rule 23 is generally presumed to be the most appropriate lead plaintiff. The lead plaintiff is the person appointed to represent the proposed class during the litigation.

The court found that Sergiu Rata established that presumption. Rata timely filed his motion, claimed to have purchased 15,430 shares, and reported a net loss of $376,126.12. The court stated that these figures were larger than those of any other putative class member who sought appointment. The court also found that Rata made the required preliminary showing of typicality and adequacy, including that he had retained experienced counsel and reported no conflict with the proposed class.

Timo Rautanen argued that the Wolfpack report had begun circulating in Chinese on February 15, 2021, rather than on February 16. He argued that Rata might therefore face a unique defense because Rata’s purchases occurred after February 15. The court rejected the argument, noting that all three complaints identified February 16 as the report date and that Rautanen had relied on that date in his initial briefing. The court also found that the larger stock-price decline after the English report suggested that the English report was the operative corrective disclosure. It concluded that Rautanen had not rebutted the presumption favoring Rata.

Lead Counsel

The court approved Rata’s selection of Block & Leviton LLP as lead counsel. It found that the firm had extensive securities-litigation experience and could capably represent the proposed class.

Disposition

The court consolidated the three actions. It denied Timo Rautanen’s motion for appointment as lead plaintiff and approval of lead counsel. It granted Sergiu Rata’s motion for appointment as lead plaintiff and approval of Block & Leviton LLP as lead counsel. The clerk was directed to close the listed motion entries.