Nowakowski v. AXT, Inc.

Summary

The United States District Court for the Northern District of California granted defendants' motion to dismiss an amended securities-fraud class action complaint against AXT, Inc. and individual defendants. The court held that plaintiffs failed to plead falsity with the particularity required by the PSLRA, including by failing to identify the sources supporting allegations concerning alleged trade-secret misappropriation and a short-seller report. The dismissal was granted with leave to amend by June 27, 2025.

Holdings

1. The amended complaint failed to plead falsity with the particularity required by the PSLRA because it did not specify reliable sources for the allegations that Tongmei had misappropriated trade secrets and that the alleged misconduct created a known risk that the IPO would fail.
2. Dismissal was entered with leave to amend because the court concluded that plaintiffs might be able to cure the identified pleading deficiency.

Questions Presented

1. Whether the amended complaint adequately pleaded falsity under the PSLRA in asserting that AXT's SEC filings omitted known risks concerning the potential failure of Tongmei's IPO.
2. Whether dismissal should be with leave to amend.

Disposition

dismissed