- Company Name
- Vuzix Corporation
- Stock Symbol
- Class Period
- Purchasers of Vuzix securities between November 9, 2017 and March 20, 2018, including purchasers in or traceable to the Company’s January 26, 2018 secondary public offering
- Motion Deadline
- September 22, 2018
- Southern District of New York
The complaint charges Vuzix, certain of its officers and directors and the underwriters of its January 26, 2018 secondary public offering (“SPO”) with violations of the Securities Exchange Act of 1934 and Securities Act of 1933. Vuzix designs, manufactures, markets and sells devices that are worn like eyeglasses and feature built-in video screens that enable users to view video and digital content, such as movies, websites and video games.
On January 26, 2018, Vuzix filed the Prospectus for its SPO with the SEC, which formed part of the SPO Registration Statement. Pursuant to the SPO Registration Statement and Prospectus, Vuzix sold 3 million shares of common stock at $10 per share for net proceeds of $28.4 million.
The complaint alleges that throughout the Class Period and in the Registration Statement for the SPO, defendants made materially false and misleading statements and/or failed to disclose material adverse facts about the Company’s business and prospects. Specifically, defendants failed to disclose that Vuzix had used unlawful stock promotion tactics to boost the Company’s stock price, which allowed Vuzix to raise nearly $30 million at a then all-time high stock price in the SPO. As a result of defendants’ false statements and omissions, the prices of Vuzix securities were artificially inflated in the SPO and during the Class Period, with Vuzix’s stock price reaching a high of close to $11 per share shortly after the SPO.
Then in March 2018, MOX Reports published a series of posts alleging the Company had unlawfully used certain stock promotion tactics to boost its stock price in order to sell shares in the SPO at an artificially inflated price of $10 per share. According to the report, “[p]romoters . . . have been predicting very near term commercialization for Vuzix for more than three years, causing the share price to repeatedly spike ahead of equity offerings. . . . Vuzix recently used an undisclosed stock promotion involving dozens of mainstream media outlets to artificially inflate [its] share price and volume, and then raise $30 million.” The report explained that “more than 50 journalists representing some of the biggest providers of mainstream news media” at the 2018 CES conference in Las Vegas “began putting out a stream [of] high visibility articles praising the Blade smart glasses from Vuzix. These journalists had evaluated the product at CES and then shared their ‘action shot’ photos and live videos with commentary that was visibly effusive, all of them citing the Blade’s ‘Alexa enabled’ functionality as the big differentiator fueling their enthusiasm.” However, according to MOX, “[i]n reality, adding Alexa functionality was a non-event. To add Alexa to any OEM device, all one needs to do is download Amazon’s developer kit. After that it then takes less than one hour of simple programming. The purpose of the Alexa ruse was that it could be used as a consistent ‘narrative’ for the basis of the massive mainstream media promotion that was being lined up by IRTH communications,” which “bragg[ed] to potential clients that it was responsible for more than 30 articles from mainstream media outlets which all simultaneously erupted in connection with [the] ‘Alexa ruse.’” On this news, the price of Vuzix shares fell $1.70 per share, or more than 22%, over three trading days, to close at $5.95 per share on March 21, 2018.