Grabar Law Office Files Shareholder Derivative Complaint Against Nominal Defendant Vuzix Corp. and its Officers and Directors.
As alleged in the complaint, in March of 2018, MOX Reports published a series of posts alleging that the Company unlawfully used certain stock promotion tactics to boost Vuzix’s share price in anticipation of a secondary public offering of its shares at $10 per share (the “MOX Reports Publication”). The MOX Reports Publication claimed that Vuzix used an undisclosed stock promotion involving dozens of mainstream media outlets to artificially inflate the share price and volume, that one of the Company’s main products, Vuzix Blade, was little more than a “low tech mock-up” that did not actually function, and that one of the stock promoters Vuzix used had a substantial history of involvement in fraudulent stock promotion schemes.
Following this news, the Company’s share price fell $1.70 per share, or more than 22%, over the course of three trading sessions, to close on March 21, 2018 at $5.95.
As a result, the Company is now subject to two securities class actions consolidated as In re Vuzix Corp. Securities Litigation, Master File No. 1:18-cv-06656, pending in the United States District Court for the Southern District of New York (the “Securities Class Action”).
On October 18, 2018, Vuzix finally provided further information on a release date for the Vuzix Blade but glaringly absent from the Company’s announcement, or other recent public filings, is any mention of Amazon Alexa, which purported to be an integral additional feature to the Vuzix Blade that was promoted by the Company, as alleged in the Securities Class Action and as conceded by the Company. Further, the Company does not expect to have a general release for both consumers and businesses until January 2019, recognized as one of the worst months for retail due to Christmas returns, instead of during the main selling Christmas holiday season, which raises the very issues of functionality addressed by the MOX Reports Publication.
The Individual Defendants breached their fiduciary duties by: (i) approving and/or causing the Company to engage in an illicit stock promotion scheme for the purpose of inflating the price of Vuzix shares in anticipation of the SPO; (ii) failing to exercise their oversight duties by not monitoring the Company’s compliance with Company procedures and federal and state regulations; and (iii) making and/or causing the Company to make false and misleading statements and/or material omissions.
A copy of the Complaint and be viewed here: 2018.10.29 – Vuzix – Complaint (stamped, reviewed)
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