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Vertiv Holdings Co.

Case Details

Class Period: February 24, 2021 - February 23, 2022
Date Filed: March 24, 2022
Case Number: 1:22-cv-3572
Jurisdiction: Southern District of New York
icon-casetype Case Type: Securities Case

Case Summary

This action is brought on behalf of all other persons and entities that (a) purchased shares of Vertiv Holdings Co. Class A common stock during the class period; or (b) purchased Vertiv shares in or traceable to the Company’s secondary public offering of Class A common stock conducted on or around November 4, 2021. Lead Plaintiffs assert claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

Vertiv designs, manufactures and services critical digital infrastructure and data centers for large enterprise customers such as Google, Microsoft, and Twitter. By the start of the class period in early 2021, COVID-related manufacturing shutdowns and travel restrictions caused raw material and freight costs to rise. Accordingly, analysts’ and investors’ “big focus” was whether Vertiv could effectively manage these inflationary costs while still achieving its margin expansion plan, which was critical to Vertiv’s financial success. To assuage investors’ concerns, throughout the class period, Defendants made clear to investors that Vertiv had the ability to increase, and was readily increasing, the price of its products to offset any additional costs and maintain its profit margins—in the Company’s own words, the Company was “getting price.”

Analysts and investors heavily relied on Defendants’ specific and repeated representations. In turn, Vertiv’s stock price skyrocketed by over 37%, from $20.80 per share at the start of the class period to reach a class period high of $28.59 per share on September 2, 2021.

The truth fully emerged on February 23, 2022, when Vertiv released its fourth quarter and full-year earnings report for 2021. Adjusted operating income was reported at 43% below the low end of management’s own guidance range — a vast departure from constructive management commentary throughout the entire fourth quarter of 2021. In the ensuing analyst conference call, Defendants admitted—in stark contrast to their numerous class period statements that Vertiv had implemented “robust pricing actions” to increase its prices that would more than “cover” inflationary costs— that the exact opposite was true: Vertiv was unable to increase prices for its services. The Company’s most senior officers made clear that Vertiv’s problems had nothing to do with external market forces or industry issues, but instead were due to Vertiv’s own operational failings.

In response to this news, Vertiv’s stock price fell by 37% in a single day, or $7.19 per share, to close at $12.39 per share—over 56% lower than the class period high from just a few months earlier, and wiping out over $2.7 billion in market capitalization.

On June 22, 2022, the Court appointed Louisiana Sheriffs’ Pension & Relief Fund, Orlando Police Pension Fund, City of Plantation General Employees Retirement System, Riviera Beach Municipal Firefighters’ Pension Trust Fund, and City of Riviera Beach General Employees’ Retirement System as Lead Plaintiffs and Saxena White as Co-Lead Counsel.

On September 16, 2022, Lead Plaintiffs filed an amended consolidated complaint. Defendants moved to dismiss the complaint on January 20, 2023. Lead Plaintiffs filed their opposition on March 31, 2023, and Defendants filed their replies on May 16, 2023.

The parties have requested oral argument on the motion to dismiss and expect the court to set a hearing date soon.

On November 6, 2023, Magistrate Judge Ona T. Wang issued a report and recommendation denying in part Defendants’ motion to dismiss the amended consolidated complaint. Defendants filed objections to the report and Lead Plaintiffs filed a response, and on January 31, 2024, Judge Woods issued an order instructing Magistrate Judge Wang to further clarify her report and the portions of Lead Plaintiffs’ case she recommended sustaining before the Court could issue a final ruling on Defendants’ motion to dismiss.