Semiconductor Company Sued For Securities Violations

On Friday, Michael Achterberg filed a complaint against semiconductor manufacturing company Xilinx and its Board of Directors for allegedly violating the Securities Exchange Act of 1934 in regards to its proposed sale of the company to Advanced Micro Devices, Inc. (AMD) and Thrones Merger Sub Inc., a wholly-owned subsidiary of AMD.

Specifically, the plaintiff claimed that on Oct. 27, Xilinx announced it had entered into a Merger Agreement with AMD, under which “the Company’s shareholders will receive 1.7234 shares of AMD common stock for each share of Xilinx common stock owned.” In December, however, the plaintiff claimed that to persuade shareholders to vote for the transaction the board “authorized the filing of a materially incomplete and misleading registration statement with the SEC on Form S-4 (the ‘Registration Statement’), in violation of Sections 14(a) and 20(a) of the Exchange Act” and Rule 14a-9. The Registration Statement recommended that Xilinx shareholders vote in favor of the proposed transaction. 

Additionally, the plaintiff proffered that the defendants had an obligation “to carefully review the Registration Statement prior to its filing with the SEC and dissemination to the Company’s shareholders to ensure that it did not contain any material misrepresentations or omissions.” Nevertheless, the plaintiff alleged that the Registration statement, which contains important information for shareholders necessary to make an informed decision regarding the Proposed Transaction, contained misrepresentations or omissions.-

The plaintiff claimed that the Registration Statement “contains projections prepared by the Company’s and AMD’s management concerning the Proposed Transaction, but fails to provide material information concerning such.” In particular, the plaintiff noted that the Securities and Exchange Commission (SEC) “has repeatedly emphasized that disclosure of non-GAAP projections can be inherently misleading, and has therefore heightened its scrutiny of the use of such projections.” 

Accordingly, to comply with new SEC Compliance and Disclosure Interpretations policy, the complaint says the defendant was required “to provide any reconciling metrics that are available without unreasonable efforts.” The plaintiff proffered that in order to make the Registration Statement “materially complete and not misleading, Defendants must provide a reconciliation table of the non-GAAP measures to the most comparable GAAP measures.” In particular, the plaintiff stated that the defendants must “disclose the line item projections for the financial metrics that were used to calculate the non-GAAP measures, including: (i) Adjusted EBITDA; (ii) Adjusted EPS; and (iii) Unlevered Free Cash Flow.” According to the plaintiff, this information is crucial for investors to make an informed decision and to better understand the defendants’ analysis and projections.

The defendants are accused of violating Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder and Section 20(a) of the Exchange Act.

The plaintiff has sought to preliminarily and permanently enjoin the defendants from “proceeding with, consummating, or closing the Proposed Transaction”; for the defendants to amend the Registration Statement to fix any untrue statements; and for the defendants to account to the plaintiff for all damages.

The plaintiff is represented by Lifshitz Law Firm, P.C.