Facts

Enphase Energy is a global technology company whose primary product, microinverter technology, produces a
fully integrated solar-plus-storage solution. On July 17, 2020, Gregory Hurst filed a securities class action suit alleging violations of various securities laws against Enphase, its CEO-Badrinarayanan Kothandaraman, and CFO-Eric Branderiz.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that defendants misled investors as to its financial results, including, among others, its domestic and international revenues, its base points expansion in gross margins and its accounting practices, all of which led to inflated financial results. These contentions were based on a short seller report published by Prescience Point Capital Management which analyzed the company's reported financials and along with a private investigation based on former employees' interviews at the company's Bangalore, India office. After the report's publication, the company's stock price plummeted with a one day drop of approximately 26 percent. The same day the report was published, plaintiff filed suit.

DEFENDANTS' CONTENTIONS: Defendants contended that plaintiff failed to meet the heightened pleading standards required for private securities fraud actions. First, defendants asserted that plaintiff did not properly plead loss
causation, with the short report not constituting a corrective disclosure. Next, they argued that the complaint failed to plead material misrepresentation or omission, with plaintiff' complaint entirely based on a short seller's report insisting that
the company's financial reporting did not add up, but without any missed earnings or financial restatement purportedly indicating an alleged accounting fraud. Defendants further argued that plaintiff failed to allege how the company ran afoul of the newly adopted ASC 606 accounting standard, instead relying on conclusory allegations, without pleading any facts illustrating that the company exercised judgment in a manner violating GAAP (Generally Accepted Accounting Principles). Finally, all the statements plaintiff relied on to allege scienter came from anonymous former employees, with the complaint failing to provide information to establish those employees' reliability and personal knowledge.

Result

The court granted defendants' motion to dismiss with leave to amend, but as plaintiff thereafter filed notice of intent not to file an amended complaint, judgment was entered for defendants.