Title: Jackson v. Microchip Technology Inc., No. CV-18-2914
Court: United States District Court for the District of Arizona
Company Name: Microchip Technology Inc.
Securities: MCHP (NASDAQ)
Class Period: March 2, 2018 to August 9, 2018
Certified Class: All persons who purchased or otherwise acquired Microchip Technology, Inc. (“Microchip”) common stock on a U.S. open market during the class period March 2, 2018 through August 9, 2018, both dates inclusive. Excluded from the Class are defendants in this action, Microchip, Steven Sanghi, Ganesh Moorthy, and J. Eric Bjornholt (collectively, “Defendants”), the officers and directors of the Company during the Class Period (the “Excluded D&Os”), members of Defendants’ and Excluded D&Os’ immediate families, legal representatives, heirs, successors or assigns and any entity in which Defendants or the Excluded D&Os have or had a controlling interest.
Wolf Popper LLP is Class Counsel in a federal securities fraud class action against defendants Microchip Technology Inc. (“Microchip”); and its then Chairman and CEO Steven Sanghi; President and COO Ganesh Moorthy; and VP and CFO J. Eric Bjornholt. The Class Representative, on behalf of the certified Class of all investors who purchased Microchip common stock on the U.S. open market between March 2, 2018 and August 9, 2018, inclusive (see above), alleges in the action that the defendants violated the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder by making materially false and misleading statements concerning Microchip’s acquisition of Microsemi Corp. in 2018. Among other things, the complaint alleges that defendants knew Microsemi had higher inventory levels in the distribution channel than what defendants believed were appropriate, and that defendants’ statements concerning Microsemi’s historical performance and the expected cash flow and net debt leverage of the combined company were misleading.
On August 9, 2018, Microchip disclosed that Microsemi had excess inventory in its distribution channel, and that, as a result, Microchip would sell fewer Microsemi products into the channel in the upcoming months, reducing its net cash flow by approximately $110 million, reducing its ability to pay down debt, and resulting in net debt leverage of 5.0x EBITDA as opposed to 4.7x EBITDA. As a result, Microchip stock fell $10.67 per share.
The litigation is pending.
For further information about this case, contact:
Robert C. Finkel
Joshua W. Ruthizer
Class Certification Granted in Microchip Federal Securities Fraud Litigation
On February 22, 2021, United States District Judge John J. Tuchi granted Lead Plaintiff Ronald Jackson’s motion for class certification in its entirety, certifying a class “of all persons who purchased or otherwise acquired Microchip Technology, Inc. (‘Microchip’) common stock on a U.S. open market during the class period March 2, 2018 through August 9, 2018, both dates inclusive.” Excluded from the class are the defendants and their affiliates.
The Court also appointed Mr. Jackson as the Class Representative, and Wolf Popper LLP, counsel to Mr. Jackson, as Class Counsel, finding that the requirements of Rule 23(g) of the Federal Rules of Civil Procedure— that a counsel seeking appointment demonstrate that it will fairly and adequately represent the class’s interest—had been met.
District of Arizona Denies Motion to Dismiss Securities Fraud Class Action Against Microchip Technology and its Senior Executives
On March 11, 2020, United States District Judge John J. Tuchi issued an Order denying, in substantial part, the motion filed by Microchip; its CEO Steven Sanghi; its President and COO Ganesh Moorthy; and its CFO J. Eric Bjornholt to dismiss the complaint filed by Wolf Popper LLP, lead counsel in this putative class action. Among other things, the Court concluded that the complaint properly alleges that the defendants’ statements concerning the historical performance of Microsemi, a competitor acquired by Microchip, were misleading given Microchip’s use of differing accounting practices. The Court found as follows:
Defendants are correct that they were transparent in their communications by saying that Microsemi employed a GAAP basis and Microchip employed a non-GAAP basis. But it is a different matter to conflate the two, report apparently GAAP revenue numbers as non-GAAP numbers, and ultimately to add numbers calculated on different bases to get a sum non-GAAP revenue number. Considering the information [p]laintiff alleges [d]efendants had regarding Microsemi’s inventory-stuffed channel, the Financial Model—and particularly the ‘Microchip + Microsemi’ sum revenue number and the calculations derived from it—was misleading.
In addition, the Court concluded that the complaint properly alleges the defendants’ intent to defraud investors, finding the allegation that they “knew of Microsemi’s inventory and revenue practices and yet misrepresented or omitted key information in communications with investors and stock analysts is cogent and at least as compelling as any nonculpable inference proffered by [d]efendants.”
Wolf Popper LLP Files Amended Complaint Against Microchip Technology Inc.
On February 22, 2019, Wolf Popper filed an Amended Class Action Complaint for Violation of the Federal Securities Laws against Microchip Technology, Inc.; Microchip’s CEO Steven Sanghi; Microchip’s President and COO Ganesh Moorthy; and Microchip’s CFO J. Eric Bjornholt. The Complaint was filed on behalf of Court-appointed Lead Plaintiff Ronald L. Jackson and a proposed class of those who purchased Microchip common stock on a U.S. open public market between March 2, 2018 and August 9, 2018.