||SEB Investment Management AB v. Align Technology, Inc., et al.
||United States District Court for the Northern District of California
||Honorable Lucy H. Koh
||SEB Investment Management AB (“SEB”)
||Align Technology, Inc.(“Align”), Joseph Hogan, and John Morici
||July 25, 2018 to October 24, 2018
This securities fraud class action involves a straightforward fraud regarding one of Align’s most closely watched metrics—its “average selling price” (or “ASP”). For years, Align commanded a substantial premium for its flagship comprehensive clear aligners as a result of the patents protecting its design and manufacturing processes. In late 2017, however, Align’s patents began to expire. At the start of the Class Period, the central question for investors was whether Align would have to lower its prices to compete with new market entries. During the Company’s second quarter earnings conference call on July 25, 2018, Defendant Hogan assured the market that Align was not adjusting its business in response to new competition. This assuaged the market’s concern, leading analysts to report after the call that “price is insulated” and “[t]here is no sign as yet that new entrants are impacting volumes or pricing.”
Unbeknownst to investors, however, Defendants had already implemented a steep new $200 discount for the Company’s comprehensive products starting on July 1, 2018. Moreover, by the time that Hogan had reassured investors that the Company was not making adjustments to address new competition, the new discounting program had already resulted in a significant deterioration in the Company’s ASP. Just three months later, during Align’s October 24, 2018 3Q18 earnings call, Defendants disclosed a staggering $100 decline in the Company’s ASPs for its comprehensive products, and indicated that they did not expect ASPs to recover moving forward. In response, Align’s stock plummeted nearly $59 per share, or more than 20%, with analysts attributing the decline to “investor concerns around the company’s ability to maintain average selling price (ASP) in the face of increased competition.”
SEB filed a consolidated complaint on May 10, 2019. Following briefing on Defendants’ motion to dismiss, the Court dismissed the May 10, 2019 complaint with leave to replead. SEB filed the operative complaint on November 29, 2019. The Court granted in part and denied in part Defendants’ motion to dismiss on September 9, 2020. On July 15, 2021, the parties announced a settlement of $16 million. On November 2, 2021, the Court granted SEB’s motion for preliminary approval and scheduled a final approval hearing for April 28, 2021.