On 08/08/2018 Construction Workers Pension Trust Fund - Lake County and Vicinity filed a Contract - Security lawsuit against Veeco Instruments, Inc . This case was filed in Santa Clara County Superior Courts, Downtown Superior Court located in Santa Clara, California. The Judges overseeing this case are Kuhnle, Thomas and Walsh, Brian C. The case status is Pending - Other Pending.
Pending - Other Pending
Santa Clara County Superior Courts
Downtown Superior Court
Santa Clara, California
Walsh, Brian C
Construction Workers Pension Trust Fund - Lake County and Vicinity
Jackson, Keith D.
Bayless, Kathleen A.
D'Amore, Richard A.
Simone, Peter J.
Peeler, John R.
Kiernan, John P.
Veeco Instruments, Inc.
St. Dennis, Thomas
Superior Court of California
Iron Workers District Council of New England Pension Fund
Jaconette, James Ian
Webb, Robert L
Foran, Derek Francis
Close, Matthew William
Superior Court of CA, County of Santa Clara
Hall, David William
Bottini, Francis Alexander
Kolesnikov, Yury A
Chang, Albert Y.
Notice Entry of Order:
Proof of Service of Summons Complaint: Comment: Proof of Service -- Summons; Complaint -- Kathleen A. Bayless
Affidavit: Comment: Affidavit of Service -- Summons; Complaint
2018-08-15 VEECO (Cont.Workers) NOA.pdf: Comment: Notice of Appearance
Order Deeming Case Complex and Staying Discovery and Responsive Pleading Deadline: Comment: Order Deeming Case Complex and Staying Discovery and Responsive Pleading Deadline signed/TEK
Notice of Related Case: Comment: Wolther (18CV329690); Iron Workers (18CV332463)
Summons Issued Filed:
Civil Case Cover Sheet: Comment: COMPLEX
Complaint (Unlimited) (Fee Applies): Comment: Complaint for Violations of the Securities Act of 1933
Order and Notice of Reassignment of Case to D1 BCW; CMC reset to 11-16-18 at 10am in D1 BCW: Comment: Order & Notice of Reassignment of Case to D1, Hon. Brian C. Walsh presiding; CMC reset to 11/16/18 at 10am in D1 - signed/BCW
Proof of Service of Summons Complaint: Comment: Affidavit of Service -- Summons; Complaint -- Peter J. Simone
Proof of Service of Summons Complaint: Comment: Affidavit of Service -- Summons; Complaint -- Keith D. Jackson
Motion: Consolidate - Judicial Officer: Walsh, Brian C; Hearing Time: 9:00 AM; Result: Heard: Granted; Comment: Motion by Plaintiffs Matt Wolther (18CV329690) and Construction Workers Pension Trust Fund-Lake County and Vicinity (18CV332644) to Consolidate Related Cases and Appoint Co-Lead CounselRead MoreRead Less
Conference: Case Management - Judicial Officer: Walsh, Brian C; Hearing Time: 10:00 AM; Result: Held; Comment: (1st CMC) Proposed Class Action * Securities Litigation * Discovery and responsive pleading deadline stayed, as of 8/9/18, when the case was deemed complex.Read MoreRead Less
Minute OrderRead MoreRead Less
Minute OrderRead MoreRead Less
Substitution: Attorney - Substitution Attorney: Comment: OLD: Derek F. Foran; Robert L. Webb NEW: Matthew W. CloseRead MoreRead Less
Acknowledgement/Receipt - Acknowledgement Receipt:Read MoreRead Less
Acknowledgement/Receipt - Acknowledgement Receipt:Read MoreRead Less
Acknowledgement/Receipt - Acknowledgement Receipt:Read MoreRead Less
Acknowledgement/Receipt - Acknowledgement Receipt:Read MoreRead Less
Acknowledgement/Receipt - Acknowledgement Receipt:Read MoreRead Less
Proof of Service: Summons DLR (Civil) - Proof of Service of Summons Complaint: Comment: Affidavit of Service -- Summons; Complaint -- Keith D. JacksonRead MoreRead Less
Notice: Entry of Order - Notice Entry of Order:Read MoreRead Less
Proof of Service: Summons DLR (Civil) - Proof of Service of Summons Complaint: Comment: Proof of Service -- Summons; Complaint -- Kathleen A. BaylessRead MoreRead Less
Affidavit - Affidavit: Comment: Affidavit of Service -- Summons; ComplaintRead MoreRead Less
Notice - 2018-08-15 VEECO (Cont.Workers) NOA.pdf: Comment: Notice of AppearanceRead MoreRead Less
Order: Deeming Case Complex - Order Deeming Case Complex and Staying Discovery and Responsive Pleading Deadline: Comment: Order Deeming Case Complex and Staying Discovery and Responsive Pleading Deadline signed/TEKRead MoreRead Less
Notice: Related Cases - Notice of Related Case: Comment: Wolther (18CV329690); Iron Workers (18CV332463)Read MoreRead Less
Summons: Issued/Filed - Summons Issued Filed:Read MoreRead Less
Civil Case Cover Sheet - Civil Case Cover Sheet: Comment: COMPLEXRead MoreRead Less
Complaint (Unlimited) (Fee Applies) - Complaint (Unlimited) (Fee Applies): Comment: Complaint for Violations of the Securities Act of 1933Read MoreRead Less
JAMES I. JACONETTE (179565) 655 West Broadway, Suite 1900 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax)
- and -
SAMUEL H. RUDMAN 58 South Service Road, Suite 200 Melville, NY 11743 Telephone: 631/367-7100 631/367-1173 (fax)
Attorneys for Plaintiff
8/8/2018 10:45 AM Clerk of Court
Superior Court of CA, County of Santa Clara
Reviewed By: R. Walker
VICINITY, Individually and on Behalf of All
Others Similarly Situated, Plaintiff, VS.
VEECO INSTRUMENTS, INC., SHUBHAM MAHESHWARI, JOHN R. PEELER,
JOHN P. KIERNAN, KATHLEEN A. BAY LESS, RICHARD A. D’AMORE, GORDON HUNTER,
KEITH D. JACKSON, PETER J. SIMONE, THOMAS ST. DENNIS and DOES 1-25, inclusive,
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Plaintiff Construction Workers Pension Trust Fund - Lake County and Vicinity (“plaintiff”), individually and on behalf of all others similarly situated, by plaintiff’s undersigned attorney, for plaintiff’s complaint against defendants, alleges the following based upon personal knowledge as to plaintiff and plaintiff’s own acts and upon information and belief as to all other matters based on the investigation conducted by and through plaintiff’s attorneys, which included, among other things, a review of U.S. Securities and Exchange Commission (“SEC”) filings by Veeco Instruments, Inc. (“Veeco” orthe “Company”), Company press releases and earnings calls, and analyst and media reports about the Company. Plaintiff believes that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery.
1. This is a securities class action on behalf of all persons and entities who purchased or acquired shares of Veeco stock pursuant or traceable to the Company’s Registration Statement and Prospectus (together, the “Offering Documents”) issued in connection with the merger of Veeco with Ultratech, Inc. (“Ultratech”) and their subsidiaries (the “Merger”). This action asserts claims under the Securities Act of 1933 (“1933 Act”) against Veeco and certain members of the Company’s executive officers, directors and authorized representatives.
2. The claims alleged herein arise under§§11, 12(a)(2) and 15 of the 1933 Act, 15 U.S.C. §§77k, 771(a)(2) and 770. Jurisdiction is conferred by §22 of the 1933 A ct and venue is proper pursuant to §22 of the 1933 A ct. This action is not removable under§22 of the 1933 A ct, which explicitly states that “[e]xcept as provided in section 16(c), no case arising under this title and brought in any State court of competent jurisdiction shall be removed to any court in the United States.” See Cyan, Inc. v. Beaver Cty. Emples. Ret. Fund, 138 S. Ct. 1061, 1065 (2018).
3. The violations of law complained of herein occurred in this County, including the dissemination of V eeco stock to Ultratech shareholders residing in this County as a result of the Merger. In addition, two of the individual defendants, Gordon Hunter and Kathleen A. Bayless, reside in this County, Ultratech is headquartered in this County at 3050 Zanker Road, San Jose, California 95134,
and many of the Merger negotiations and due diligence occurred in this County. Furthermore, portions of the Offering Documents for the Merger alleged herein to be false and misleading relied on information, documents and witnesses maintained in this County, or that can be found in this County.
4, Plaintiff Construction W orkers Pension Trust Fund - Lake County and Vicinity acquired shares of Veeco stock in exchange for Ultratech stock pursuant to the Registration Statement and Prospectus issued in connection with the Merger and has been damaged thereby.
D. Defendant V eeco Instruments, Inc. is a corporation which designs and manufactures thin film equipment. Veeco’s equipmentis used to make electronic devices, including light emitting diodes (“LEDs"), micro-electromechanical systems (“MEMS”), wireless devices, power electronics, hard disk drives and semiconductor devices. Veeco’s products are sold to semiconductor and advanced packaging device manufacturers. Veeco conducts substantial business in the United States, including within this County, through its now wholly-owned subsidiary Ultratech, which is headquartered in San Jose, California.
0. Defendant Shubham Maheshwari (“Maheshwari”) served as Chief Financial Officer (“CFO”) of Veeco at the time of the Merger. Defendant Maheshwari signed or authorized the signing of the false and misleading Registration Statement.
7. Defendant John R. Peeler (“Peeler”) served as Chairman, Chief Executive Officer (“CEQ”) and a director of Veeco at the time of the Merger. Defendant Peeler signed or authorized the signing of the false and misleading Registration Statement.
8. Defendant John P. Kiernan (“Kieman”) served as Senior Vice President, Finance and Corporate Controller (Principal A ccounting Officer) of Veeco at the time of the Merger. Defendant Kiernan signed or authorized the signing of the false and misleading Registration Statement.
9, Defendant Kathleen A. Bayless (“Bayless”) served as a director of the Company at the time of the Merger. Defendant Bayless signed or authorized the signing of the false and misleading Registration Statement. Defendant Bayless is aresident of San Jose, California, in Santa Clara County.
10. Defendant Richard A. D’amore (“D’Amore”) served as a director of the Company at the time of the Merger. Defendant D’ Amore signed or authorized the signing of the false and misleading
Registration Statement. 11. Defendant Gordon Hunter (“Hunter”) served as a director of the Company at the time of the Merger. Defendant Hunter signed or authorized the signing of the false and misleading Registration Statement. Defendant Hunter is a resident of Los Alto Hills, California, in Santa Clara County.
12. DefendantKeith D. Jackson (“Jackson”) served as a director of the Company at the time of the Merger. Defendant Jackson signed or authorized the signing of the false and misleading Registration Statement.
13. Defendant Peter]. Simone (“Simone”) served as a director of the Company at the time of the Merger. Defendant Simone signed or authorized the signing of the false and misleading Registration Statement.
14. Defendant Thomas St. Dennis (“St. Dennis”) served as a director of the Company at the time of the Merger. Defendant St. Dennis signed or authorized the signing of the false and misleading Registration Statement and is a resident of California.
15. The defendants referenced above in §96- 14 are collectively referred to as the “Individual Defendants.” The Individual D efendants signed the Registration Statement. Furthermore, as directors and/or executive officers of the Company, the Individual D efendants participated in the solicitation and sale of Veeco stock to shareholders of Ultratech as consideration in the Merger for their own benefit and the benefit of V eeco.
16. The true nature and capacities of defendants sued herein under California Code of Civil Procedure §474 as Does 1 through 25, inclusive, are presently not known to plaintiff, who therefore sues these defendants by such fictitious names. Plaintiff will seek to amend this complaint and include these Doe defendants’ true names and capacities when they are ascertained. Each of the fictitiously named defendants is responsible in some manner for the conduct alleged herein and for the injuries suffered by plaintiff and the Class (as defined below).
17. Plaintiff brings this action as a class action pursuant to §382 of the California Code of Civil Procedure on behalf of a class consisting of all persons or entities who purchased or acquired stock of Veeco pursuant or traceable to the Company’s Registration Statement and Prospectus (the “Class”). Excluded from the Class are defendants and their families, the officers, directors and affiliates of the defendants, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest.
18. The members of the Class are so numerous that joinder of all members is impracticable. Veeco’s stock is actively traded on the NASDAQ Exchange under the ticker symbol “VECO” and millions of shares were sold in the Merger. While the exact number of Class members is unknown to plaintiff at this time and can only be ascertained through appropriate discovery, plaintiff believes that there are thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by the Company orits transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions.
19. Plaintiff’s claims are typical of the claims of the members of the Class, as all members of the Class are similarly affected by defendants’ wrongful conduct in violation of federal law as complained of herein.
20. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation.
21. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are:
(a) whether defendants violated federal securities laws, including but not limited to the 1933 Act; (b) whether statements made by defendants to the investing public in the Offering Documents were materially false and misleading or misrepresented or omitted material facts about the Merger; and (c) the proper measure of damages. 22. A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of
individual litigation make it impracticable for members of the Class to individually redress the wrongs
done to them. There will be no difficulty in the management of this action as a class action.
23. The Registration Statement described V eeco as follows:
Veeco designs, develops, manufactures, markets, and supports thin film equipment to
meet the demands of key global trends such as improving energy etficiency, enhancing
mobility, and increasing connectivity. Veeco’s equipment is used to make electronic
devices which enable these trends, including light emitting diodes (“LEDs”), micro- electromechanical systems (“MEMS”), wireless devices, power electronics, hard disk
drives (“HDDs”), and semiconductor devices. Veeco’s products are sold to
semiconductor and advanced packaging device manufacturers, and Veeco may also
license its technology to its customers or partners.
24, Ultratech is a recognized leader of lithography products for Advanced Packaging applications and for LEDs, and is a pioneer for laser spike anneal technology used for the production of semiconductor devices. In addition, Ultratech offers wafer inspection solutions, leveraging its proprietary coherent gradient sensing technology, which address a wide variety of semiconductor applications.
25. At the time of the Merger, Ultratech was the dominant vendor in the growing semiconductor advanced packaging market, with a promise of strong earnings and revenue synergies. A's aresult, Ultratech was a very promising merger candidate for Veeco. The Registration Statement claimed that “V eeco develops highly differentiated, ‘best-in-class’ equipment for critical performance steps in thin film processing. Veeco’s products provide leading technology at low cost-of-ownership. Core competencies in advanced thin film technologies and decades of specialized process know-how help Veeco stay at the forefront of these rapidly advancing industries.”
206. Indeed, priorto its acquisition of Ultratech, V eeco had significantly underperformed the market, resulting in a steep decline in its stock price. After closing at a high of $41.78 per share on March 21, 2014, Veeco’s stock had plummeted to just $17.54 per share by July 18, 2016
(notwithstanding the fact that the rest of the stock market was in a bull run), as reflected in the Veeco Closing Share Price
27. Then,onAugust1, 2016, Veeco reported encouraging financial results in a press release and Form 8-K filed with the SEC. The press release suggested V eeco was executing on its turnaround plan. Veeco stated that its gross margins exceeded expectations, having improved by 70 basis points. In announcing Veeco’s second quarter 2016 results, defendant Peeler stated:
“[W ]e have taken decisive steps aimed at improving our through-cycle profitability by
reducing fixed costs and streamlining our operations. This plan will enable us to lower
our quarterly adjusted EBITDA breakeven level to between $75 and $80 million in
revenue, without compromising our ability to capitalize on growth opportunities.
Looking ahead, we see positive indications that should lead to a pick-up in demand for
our Metal Organic Chemical Vapor Deposition (‘(MOCVD’) equipment over the near
Peeler announced that bookings had increased slightly to $68 million, supported by increased orders in the Company’s advanced packaging business.
28. In the August 1, 2016 Form 8-K, defendant Peeler caused Veeco to state: “The
restructuring plan involves the consolidation of three manufacturing operations and streamlining of field and administrative functions. The plan is expected to be substantially completed by the end of 2016 and to result in annualized savings of approximately $20 million starting in the first quarter of 2017.”
29. Inresponse to these encouraging statements and V eeco’s improving financial condition, which analysts were told would “‘lead to a pick-up in demand for [V eeco’s] Metal Organic Chemical
Vapor Deposition (“MOCVD”) equipment over the near term,’” Veeco’s stock rallied, climbing to above $29.00 per share by the end of 2016.
30. On February 2, 2017, Veeco and Ultratech entered into the A greement and Plan of Merger (“Merger A greement”) pursuant to which V eeco agreed to acquire Ultratech by way of a merger of amerger subsidiary with and into Ultratech, with Ultratech, as the surviving corporation, becoming a wholly-owned subsidiary of V eeco.
31. Inannouncing the Merger, defendant Peeler stated:
“The strategic combination will establish Veeco as a leading equipment supplier in the high growth Advanced Packaging industry. Ultratech’s leadership in lithography together with Veeco’s Precision Surface Processing (PSP) solutions form a strong technology portfolio to address the most critical Advanced Packaging applications. We believe our complementary end market exposure and customer relationships will create the ideal platform to accelerate growth . . .. Ultratech is a great fit with our strategy to profitably grow our business and diversify ourrevenue. We expect this transaction to be immediately accretive to adjusted EBITDA and non-
32. Pursuant to the Merger A greement, Ultratech shareholders received the right to receive, for each Ultratech share they owned, an amount equal to: (i) $21.75 in cash without interest; (ii) 0.2675 of a share of Veeco stock; and (iii) cash in lieu of fractional shares of Veeco common stock.
33. Ultratech held a special meeting of its stockholders to vote on matters related to the proposed merger. The special meeting was held on May 25, 2017, at 2:00 p.m., local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, California 94025.
34. To solicit Ultratech shareholders to vote in favor of the Merger, Veeco and the Individual Defendants prepared, reviewed and signed a Registration Statement on Form S-4 with the SEC on March 13, 2017 and an Amendment to the S-4 Registration Statement on April 21, 2017 (together, the “Registration Statement”). The Registration Statement informed Ultratech shareholders
that: This proxy statement/prospectus, which forms part of a registration statement on
Form S-4 filed with the United States Securities and Exchange Commission (the “SEC”)
by Veeco, constitutes a prospectus of Veeco under Section 5 of the Securities A ct of
1933, as amended (the “Securities A ct”), with respect to the shares of Veeco common
stock to be issued pursuant to the merger. . . .
You should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide
you with information that is different from that contained in, or incorporated by
reference into, this proxy statement/prospectus. Veeco and Ultratech take no
responsibility for, and can provide no assurances as to the reliability of, any other information that others may give you and, if given, such information must not be relied
on as having been authorized.
35. The Registration Statement was declared effective as of April 24, 2017 and the Prospectus was filed the same day with the SEC and disseminated to Ultratech shareholders. The Prospectus incorporated and formed a part of the Registration Statement (the “Prospectus”). The Registration Statement and Prospectus are collectively referred to herein as the “Offering Documents.”
36. Based on the false and misleading Registration Statement, Ultratech shareholders voted to approve the Merger, which was completed on May 26, 2017.
37. The Offering Documents were negligently prepared by Veeco and the Individual Defendants, and as a result contained material misrepresentations and omissions.
38. The Offering Documents stated that “V eeco’s portfolio of technology solutions sell into fourkey market areas: Lighting, Display & Power Electronics; A dvanced Packaging, MEMS & Radio Frequency; Scientific & Industrial; and Data Storage.”
39. Defendant Peeler told the market and Ultratech shareholders in the press release announcing the Merger that Veeco’s acquisition of Ultratech would “establish Veeco as a leading equipment supplier in the high growth Advanced Packaging industry.”
40. As noted supra, Veeco’s stock price had declined significantly prior to the announcement of the Merger. The Registration Statement included historical financial results of V eeco, which also reflected reduced revenues and earnings at Veeco in 2016:
The following tables present selected historical consolidated financial data of
Veecovears ended December 31, 2016, 2015, 2014, 2013, and 2012. The consolidated financial statements of V eeco have been presented in accordance with AP.
Y ear ended December 31
(in thousands, except per share data)
Statement of Operations Data:
Net sales $ 332,451 $477,038 $392,873 $331,749 $516,020 Operating income (1oss) (120,402) (23,232) (79,209) (71,812) 37,212 Income (loss) from continuing operations, net
of tax (122,210) (31,978) (66,940) (42,263) 26,529 Basic income (loss) per common share from
continuing operations (3.11) (0.80) (1.70) (1.09) 0.69 Diluted income (loss) per common share from
continuing operations (3.11) (0.80) (1.70) (1.09) 0.68
41. However, to entice Ultratech shareholders to vote in favor of the Merger, the defendants told the market that V eeco’s first half 2016 results were an aberration, that V eeco had turmed the corner, that it was executing on its turnaround plan and its financial results were improving, that the Merger with Ultratech would help diversify the Company’s business and “establish Veeco as a leading equipment supplier in the high growth Advanced Packaging industry,” that Veeco’s and Ultratech’s “complementary end market exposure and customer relationships will create the ideal platform to accelerate growth,” and that the Merger would be accretive immediately and lead to significant synergies.
42. To that end, the Offering Documents contained projections for Veeco that reflected management’s message of a successful turnaround and earmings that were improving from the first half of 2016. Forexample, the Offering Documents contained the following projections for2017 and 2018 based on the “Street Case”:
Veeco Street Case
Revenue $411.4 $461.6 Gross Profit 167.8 194.8 EBITDA 53.0 80.9 Operating Income 38.0 04.2 Non-GAAP Net Income o 38.4 Non-GAAP Eamings Per Share 0.59 0.96 43. While the Offering D ocuments indicated that the Street Case was based on consensus analyst expectations, not internal V eeco projections, the analysts’ consensus estimates were based on at least some internal projections V eeco had provided to the analysts when it announced its fourth quarter 2016 results on February 16, 2017, which results were announced prior to the date the Prospectus was filed on A pril 24, 2017. Thus, the “Street Case” projections forV eeco in the Prospectus were based in part on internal Veeco projections provided on February 16, 2017. Those projections provided by Veeco were as follows:
Guidance and Outlook
The following guidance is provided for Veeco’s first quarter 2017:
. Revenue is expected to be in the range of $85 million to $100 million
. Adjusted EBITDA is expected to be in the range of $5 million to $11 million
. GAAP earnings (loss) per share are expected to be in the range of ($0.28) to ($0.12) and includes a pre-tax interest expense estimated to be ~$4 million associated with the 2023 Convertible Notes
e Non-GAAP earnings per share are expected to be in the range of $0.00 to $0.16 and includes a pre-tax interest expense estimated to be ~$2 million associated with the 2023 Convertible Notes
44, Laterin the February 16, 2017 press release, Veeco provided the following additional information about the guidance it had provided to analysts:
Veeco Instruments Inc. and Subsidiaries Reconciliation of GAAP Net Income (loss) to Adjusted EBITDA (in millions)
Guidance for the three months
ended March 31, 2017
GAAP Netincome (loss) $ (1 Share-based compensation
Restructuring A cquisition
Interest (income) expense
Income tax expense (benefit)
Adjusted EBITDA $ 5 - %11 45. Thus, the Veeco Street Case contained in the Offering D ocuments was in fact based on at least some significant internal V eeco projections forthe first quarter of 2017 that V eeco had provided to the market prior to the date of the Prospectus, which projections signaled continued significant improvement from Veeco’s disappointing 2016 results for Veeco’s 2017 and 2018 financial results. The Offering Documents thus created the misleading impression that V eeco was executing well on its turnaround plan and would realize significant increased earnings, growth and profitsin 2017 and 2018. This impression was misleading, as indicated herein, because the Offering Documents failed to disclose material facts known at the time of the filing of the Prospectus, including the fact that Veeco was already experiencing delays in orders forits and Ultratech’s advanced packaging business and increased competition in China in Veeco’s MOCV D market, leading to pricing pressure, and that Veeco was already in an acrimonious dispute with its largest competitor in China, A dvanced Micro-Fabrication Equipment Inc. (“AMEC”), regarding intellectual property and patent infringement, and that these material problems, events and trends would adversely affect its rate of growth and financial results.
46. Veeco, which had previously been the dominant playerin A siain its market, had seen its market share and margins in A sia decline as competition entered the market. AMEC was one of the Company’s biggest competitors and had gained market share in A sia by undercutting Veeco’s prices.
47. Significantly, the Offering Documents did not disclose that AMEC was only able to gain market share and undercut Veeco’s prices by infringing Veeco’s intellectual property, that Veeco and AMEC were in an acrimonious dispute about intellectual property and patents, that AMEC, which was 25% owned by the Chinese government and thus had significant political and economic pull in China, intended to aggressively retaliate against Veeco in China in response to Veeco’'s allegations of intellectual property infringement, and that these significant disputes were likely to continue to erode Veeco’s market share and margins in its key Chinese market.
48. The Offering Documents falsely stated that no third party had infringed Veeco’s intellectual property. In the “representations and warranties” clause of the Merger A greement, in §5.14, Section 5.14 Intellectual Property
(c) Asof the date of this A greement, there are no legal disputes or claims pending or, to the knowledge of Parent, threatened alleging infringement, misappropriation or any other violation of any Intellectual Property of any Third Party by Parent or any of its Subsidiaries that would reasonably be expected to have a Parent Material A dverse Effect.
(d) To the knowledge of Parent, none of Parent or its Subsidiaries has infringed, misappropriated or otherwise violated any Intellectual Property of any Person, except for such infringements, misappropriations or violations that would not reasonably be expected to have, individually or in the aggregate, a Parent Material A dverse Effect.
(e) To the knowledge of Parent, no Parent Owned IP has been infringed, misappropriated or otherwise violated by any Third Party, except for such infringements, misappropriations orviolations that would not reasonably be expected to have, individually or in the aggregate, a Parent Material A dverse Effect.
49. These statements were false. At the time of the Merger, Veeco was involved in acrimonious accusations of patent and intellectual property violations with one of its major competitors, AMEC.
50. Indeed, the charges of intellectual property violations were so contentious and unresolved that, on April 12, 2017, Veeco filed a patent infringement complaint in the U.S. District Court for the Eastern District of New Y ork (“EDNY ”) against AMEC’ s primary wafer carrier supplier - SGL Carbon, LLC and SGL Carbon SE (collectively, “SGL”) - alleging infringement of patents relating to wafer carrier technology used in MOCV D equipment. The complaint alleged that SGL was infringing Veeco’s patents by making and selling certain wafer carriers to AMEC. Veeco’s lawsuit sought an injunction which included a request to prohibit SGL from selling wafer carriers for use in MOCVD systems made by AMEC.
51. The Offering Documents were false and misleading because they failed to disclose Veeco’s intellectual property dispute with AMEC. Inaddition to omitting this material information, the “Risk Factors” portion of the Prospectus was false and misleading because it did not disclose the dispute and instead only listed two shareholder lawsuits against Ultratech as legal risks:
Litigation against Veeco and Ultratech, or the members of the Ultratech board, could A's further discussed in the section entitled “Litigation Related to the Merger” beginning on page 99 of this proxy statement/prospectus, there have been two purported class actions filed by Ultratech shareholders related to the merger. While Ultratech and V eeco believe that the claims asserted in these actions are without merit, the results of any such potential legal proceedings are difficult to predict, and could delay or prevent the merger from becoming effective in a timely manner. The existence of litigation related to the merger could affect the likelihood of obtaining the required approval from Ultratech stockholders. Moreover, any litigation could be time consuming and expensive, could divert Veeco’s and Ultratech’s management's attention away from their regular business and, if any lawsuitis adversely resolved against either Veeco, Ultratech or members of the Ultratech board (each of whom Ultratech is required to indemnify pursuant to indemnification agreements), could have a material adverse effect on Veeco’s or Ultratech’s financial condition.
52. Again, these statements were false and misleading in that they only listed the two shareholder lawsuits against Ultratech, failed to disclose the material intellectual property dispute with AMEC, and merely described the generic and allegedly as-yet unrealized risk of future litigation against the Company without disclosing the existing, already realized legal dispute with AMEC, the already- filed April 12, 2017 lawsuit, and the likely future negative effects on Veeco’s financial condition and prospects from the material legal dispute with AMEC and SGL.
53. Dueto the failure to resolve the parties’ ongoing material intellectual property disputes, onJuly 13, 2017, less than three months after the Registration Statement was declared effective, AMEC filed a patent infringement complaint against Veeco Instruments Shanghai Co., Ltd. (“Veeco Shanghai”) with the Fujian High Court in China, alleging that Veeco’s MOCVD systems infringed a Chinese utility model patent relating to the synchronous movement engagement mechanism in a chemical vapor deposition reactor and seeking injunctive relief and monetary damages.
54. The Offering Documents also failed to disclose the material fact that, at the time of the Merger, delays in orders from the advanced packaging business had already materialized and Veeco was experiencing increasing competition in China, and that these delays and increased competition were reasonably likely to result in a further slowdown in the Company’s rate of growth of revenues.
55. The Offering Documents were materially false and misleading because they failed to disclose:
(a) that V eeco was already experiencing, at the time of the Merger, delays in orders
for its and Ultratech’s advanced packaging business and increased competition in China in Veeco’s (b) thatVeeco was already experiencing, at the time of the Merger, pricing pressure and reduced margins in its MOCV D business in China, which trends were expected to persist and worsen going forward;
(c) that Veeco was already in an acrimonious dispute with its largest competitorin China, AMEC, regarding intellectual property and patent infringement, which was likely to result in lawsuits and imperil Veeco’s business in China;
(d) that AMEC was taking advantage of its infringement of Veeco’s intellectual property and patents to undercut Veeco’s prices in China in the MOCV D market, and that this conduct would continue to lead to increased pricing and reduced margins for Veeco in China;
(e) that AMEC, which is 25% owned by the Chinese government, would likely retaliate against V eeco in response to Veeco’s lawsuit against SGL (a main supplierto AMEC), and that AMEC was likely to win any related dispute in China given the Chinse government’'s ownership interest in AMEC; and
() that, as a result of (a)-(e), the Company’s business and financial prospects were materially misrepresented in the Offering Documents.
50. Moreover, Item 303 of SEC Regulation S-K, 17 C.F.R. §229.303(a)(3)(ii), requires defendants to “[d]escribe any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on the sales or revenues or income from continuing operations.”
57. Similarly, Item 503 of SEC Regulation S-K, 17 C.F.R. §229.503, requires, in the “Risk Factors” section of registration statements and prospectuses, “a discussion of the most significant factors that make the offering speculative or risky” and requires each risk factor to “adequately describe the risk.” The failure of the Registration Statement to disclose the facts listed in 955 violated 17 C.E.R. §229.303(a)(3)(i1), because these undisclosed facts would (and did) have an unfavorable impact on the Company’s sales, revenues and income from continuing operations. This failure also violated 17 C.F.R. §229.503 because these specific risks were not adequately disclosed, or not disclosed at all, even though they were some of the most significant factors that made an investment in 58. The Merger was completed on May 26, 2017. As a result of the Merger, V eeco issued approximately 7,929,357 shares to Ultratech shareholders. On the first trading day, the V eeco stock issued in the Merger closed at $32.00 per share, representing over $253 million in total market value.
59. Afterthe Merger closed, Veeco’s stock began an abrupt downward spiral, as material information that had been omitted from the Offering Documents began to seep into the market. Between May 26, 2017, when the Merger closed, and December 8, 2017, Veeco’s stock declined from $32.00 per share to just $11.90 per share, a decline of 62.7% , while during the same time the Dow Jones Industrial Average gained 15.96%, as reflected in the following chart:
60. OnAugust3, 2017, after the market closed, V eeco had a conference call with analysts to discuss its second quarter 2017 earnings. During the call, defendant Maheshwari, Veeco’s CFO, stated: [W ]e are guiding revenues in the range of $125 million to $145 million. This is lower than previously expected . ... [W]e are seeing a temporary pause in the advanced packaging market. This has resulted in several Ultratech advanced packaging lithography tool shipments pushed out of Q3, which is impacting the quarter by
approximately $15 million in revenue. During the August 3, 2017 call, defendant Peeler, the Company’s CEO, disclosed that “we are seeing signs of more competition in China [in the MOCV D market]” and that “[w]e have had some shipments push out and orders slow down for our advanced packaging lithography products over the last few months.”
6l1. Defendants’ revelations of increased competition in the MOCV D market and deferred
orders from its customers in its advanced packaging business startled analysts, who were very expectations. The very first question from an analyst during the question and answer session that followed defendants’ prepared remarks was from an analyst who wanted to know more about increased competition in China in the MOCV D market:
[Sreekrishnan Sankar, BofA Merrill Lynch:] First and foremost, you guys mentioned about the competition in China on the MOCVD front. Can you elaborate more on it? Because it seems like your largest customer in C hina, your share might be weakening. And where is your share today and where do you think it might end up being exiting 2017 for the MOCV D until now?
[Peeler:] Sure, Krish. So first of all, we’ve seen the China market heating up. A nd there are more purchases from a variety of both first tier and second tier customers. These customers have wanted to have two - a dual supplier approach for a long time. And so they have been purchasing from Veeco, but there have also been some purchases from competitors . . . obviously, there is a competitive battle going on.
62. Analysts also were concerned about Veeco’s disclosure that it had been experiencing delayed orders in its advanced packaging business. In response to a question from an analyst, defendant Peeler admitted the problem and stated that V eeco did not have visibility as to when the problem would
[ Sreekrishnan Sankar:] John, you mentioned about the advanced packaging push outs for Ultratech. Do you expect that to revenue at some - or, like, be shipped sometime in Q4 this year? Ordo you think it's more pushed out into next year?
[Peeler:] We’'ve had some customers that were previously going to take product in Q3, push out to Q4. And so we have seen something of a pause. If you remember, we had very strong shipments in the second half of 2016 and Q1 0of 2017. So I think there’s a little bit of a digestion going on. We think the market will bounce back, but the timing'’s little unclear at this point.
[Maheshwari:] Krish, I'd also add that on the advanced packaging side and Ultratech, we get much less visibility. So the visibility into Q4 is less at this time.
[Y euk-Fai Mok, Needham & Company:] Justa follow-up on Krish’s question on advanced packaging. . . . [I]n terms of push out, anyway you can cost size that forus to kind of give us a better way to think about the factor?
[Peeler:] Sure, Edwin. As we mentioned, in Q3, we believe the impact of push out is about $15 million. Not sure if that answers your question, but that gives you a quantification of what we said. 63. During the conference call, defendant Peeler conceded in response to a question from an [Henry Constantine Elder, Goldman Sachs Group Inc.:] So with the competition in China, would you expect any impact on your own pricing if you try to defend market share?
[Peeler:] Yes, well, it’s obviously a more competitive market, so there is price pressure.
64. Inresponse to this adverse information, and notwithstanding the fact that Veeco’s results for the second quarter of 2017 came in within consensus expectations, Veeco’s stock tanked, falling 24% on unusually heavy volume of 3 million shares, almost five times its normal volume. The stock, which had closed at $28.80 on August 3, 2017, closed at $21.85 on August 4, 2017.
65. OnOctober 24, 2017, analyst KeyBanc Capital Markets downgraded shares of V eeco, citing a triple threat in the Company’s MOCV D business: share loss, pricing risk and potential market slowdown in 2018. Analysts Daniel Baksht and W eston Twigg said their checks with competitorsand a component supplier for MOCV D equipment had left them worried about the competitive dynamics in
the Company’s MOCV D business. The analysts said this would:
1. Have a sustainable impact on V eeco’s share. e Drive downside risk to pricing. 3. Set up market-slowdown risk in 2018.
66. Inits downgrade on Veeco, KeyBanc said it was unlikely Veeco could regain market share in 2018 up to its 2016 levels with its newly introduced EPIK 868 MOCV D systems, given the price-competitive environment and the recent success of new entrants such as AMEC and TOPEC. KeyBanc noted that these companies had achieved more than 50% market share for GaN-based MOCVD systems in China in 2017 from low-single-digit share in 2016.
67. Inresponseto KeyBanc's downgrade, Veeco stock dropped 13.8% on extremely heavy volume of 1.44 million shares. 69. OnNovember3, 2017, Veeco filed its third quarter 2017 financial results and update for the period ended September 30, 2017 on Form 10-Q. The Form 10-Q stated that Veeco generated revenues of $131.9 million; a GAAP netloss of $21.9 million, or $0.47 per share; and Non-GAAP net income of $4.3 million, or $0.09 per diluted share.
70. When Veeco reported its third quarter 2017 financial results, it also issued a press release providing the following guidance for the fourth quarter 2017:
» Revenue is expected to be in the range of $135 million to $155 million e GAAP net loss is expected to be in the range of ($15) million to ($8) million
. Non-GAAP operating income is expected to be in the range of $5 million to $12 million
. GAAP eamnings (loss) per share are expected to be in the range of ($0.33) to ($0.17) e Non-GA AP earnings (loss) per share are expected to be in the range of
$0.00 to $0.16
71. Based on Veeco’s reported results and financial guidance, V eeco stock declined further, falling to just $16.30 per share on November 3, 2017.
72. Then, on December 7, 2017, after the market closed, Veeco issued a press release entitled “Veeco Provides Update on Patent Litigation” regarding its patent litigation with AMEC. In the press release, Veeco disclosed that “the Fujian High Courtissued a ruling . . . applicable in China, that requires Veeco Shanghai to stop importing, making, selling and offering to sell Veeco EPIK 700 model MOCVD systems which contain the accused infringing synchronous movement engagement mechanism covered by AMEC utility model patent ZL 201220056049.5 and wafer carriers used as supplies for the EPIK 700 MOCVD system.”
73. Inresponse to this news, Veeco’s stock tanked, falling 18.9% from a closing price of $14.65 on December 7, 2017 to $11.90 on December 8, 2017, on extremely heavy volume of over 6.5 million shares, compared to volume of only 574,000 the day before. See Steve Symington, Why Veeco Instruments Inc. Stock Is Plummeting Today, The Motley Fool (Dec. 8, 2017) (“Shares of Veeco Instruments Inc. (NASDA Q:VECO) are plummeting today, down 18.9% as of 1:30 p.m. EDT, afterthe infringement suit brought by Chinese rival A dvanced Micro-Fabrication Equipment (AMEC) this past July.”).
74. Veeco’s stock has never fully recovered and, as of the filing of this complaint, trades at approximately $14 per share, still reflecting a more than 56% decline from its value at the time of the closing of the Merger.
For Violation of §11 of the 1933 Act A gainst All Defendants
75. Plaintiff repeats and realleges each preceding paragraph by reference.
76. This Cause of Action is brought pursuant to § 11 of the 1933 Act, 15 U.S.C. §77k, on behalf of the Class, against all defendants.
77. This Cause of Action does not sound in fraud. Plaintiff does not allege that defendants had scienter or fraudulent intent, which are not elements of a §11 claim.
78. The Registration Statement for the Merger was inaccurate and misleading, contained untrue statements of material fact, omitted to state other facts necessary in order to make the statements made not misleading, and omitted to state material facts required to be stated therein.
79. DefendantV eeco is the registrant and issuer of the stock sold in the Merger. Asissuerof the stock, Veeco is strictly liable to plaintiff and the Class for the misstatements and omissions in the Registration Statement.
80. The defendants named herein were responsible for the contents and dissemination of the Registration Statement.
81. None of the defendants named herein made a reasonable investigation or possessed reasonable grounds for the belief that the statements contained in the Registration Statement were true and without omissions of any material facts and were not misleading.
82. By reason of the conduct alleged herein, each defendant violated, and/or controlled a person who violated, §11 of the 1933 Act. 84. Plaintiff and the Class have sustained damages. The value of Veeco stock has declined substantially subsequent to and due to defendants’ violations.
85. At the time of their purchases and acquisitions of Veeco stock, plaintiff and other members of the Class were without knowledge of the facts concerning the wrongful conduct alleged herein. Lessthan one year has elapsed from the time that plaintiff discovered orreasonably could have discovered the facts upon which this complaint is based to the time that plaintiff filed this complaint. Less than three years have elapsed between the time that the securities upon which this Cause of A ction is brought were offered to the public and the time plaintiff filed this complaint.
86. By virtue of the foregoing, plaintiff and the other members of the Class are entitled to damages under § 11 from defendants, and each of them, jointly and severally.
For Violation of §12(a)(2) of the 1933 Act A gainst All Defendants
87. Plaintiff repeats and realleges each preceding paragraph by reference.
88. This Cause of Action is brought pursuant to §12(a)(2) of the 1933 Act, 15 U.S.C. §771(a)(2), on behalf of the Class, against all defendants.
89. This Cause of Action does not sound in fraud. Plaintiff does not allege that defendants had scienter or fraudulent intent, which are not elements of a §12(a)(2) claim.
90. By means of the defective Prospectus, defendants promoted and sold Veeco stock to plaintiff and other members of the Class for the benefit of themselves and their associates.
91. The Prospectus contained untrue statements of material fact and concealed and failed to disclose material facts, as detailed above. Defendants owed plaintiff and other members of the Class who purchased or acquired V eeco stock pursuant to the Prospectus the duty to make a reasonable and diligent investigation of the statements contained in the Prospectus to ensure that such statements were true and that there was no omission to state a material fact required to be stated in order to make the statements contained therein not misleading. Defendants, in the exercise of reasonable care, should 92. Plaintiff and the other members of the Class did not know, nor in the exercise of reasonable diligence could they have known, of the untruths and omissions contained in the Prospectus at the time plaintiff and other Class members acquired V eeco stock.
93. By reason of the conduct alleged herein, defendants violated §12(a)(2) of the 1933 Act. As a direct and proximate result of such violations, plaintiff and the other members of the Class who purchased or acquired Veeco stock pursuant to the Prospectus sustained substantial damages. A ccordingly, plaintiff and the other members of the Class who hold the V eeco stock issued pursuant to the Prospectus have the right to rescind and recover the consideration paid for their stock, and hereby tender their stock to the defendants sued herein. Class members who have sold their stock seek damages to the extent permitted by law.
For Violation of §15 of the 1933 Act A gainst All Defendants
94. Plaintiff repeats and realleges each preceding paragraph by reference.
95. This Cause of Action is brought pursuant to § 15 of the 1933 A ct against all defendants.
96. The Individual Defendants each were control persons of Veeco by virtue of their positions as directors, senior officers and/or authorized representatives of the Company. The Individual Defendants each had a series of direct and/or indirect business and/or personal relationships with other directors and/or officers and/or major shareholders of V eeco and/or Ultratech. The Company controlled the Individual Defendants and all of its employees.
97. Defendants each were culpable participants in the violations 0f §§11 and 12(a)(2) of the 1933 A ctalleged in the Causes of A ction above, based on their having signed or authorized the signing of the Registration Statement and having otherwise participated in the process that allowed the issuance of Veeco stock in the Merger to be successfully completed.
98. By reason of such wrongful conduct, defendants are liable pursuant to § 15 of the 1933 Act. As a direct and proximate result of said wrongful conduct, plaintiff and other members of the
WHEREFORE, plaintiff prays for relief and judgment, as follows:
A. Declaring this action to be a proper class action and certifying plaintiff as Class representative under § 382 of the California Code of Civil Procedure;
B. Awarding compensatory damages in favor of plaintiff and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;
C. Awarding plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees;
D. A warding rescission or a rescissory measure of damages; and
E. Awarding such equitable/injunctive or other relief as the Court may deem just and proper.
Plaintiff hereby demands a trial by jury.
DATED: August 8, 2018 ROBBINS GELLER RUDMAN
JAMES I. JACONETTE
s/ [ames I. [aconette
JAMES I. JACONETTE
655 West Broadway, Suite 1900 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax)
SAMUEL H. RUDMAN
58 South Service Road, Suite 200
Melville, NY 11743
A ttorneys for Plaintiff