Collapse of Amazon’s iRobot Buy Spurs Securities Fraud Class Action vs. iRobot

Dylan Das seeks to recover damages on behalf of himself and other iRobot shareholder class members attributable to the 74% plunge in iRobot’s stock value during the 17-month period in which Amazon and iRobot were working unsuccessfully to win global regulators' approval of Amazon’s $1.7 billion iRobot buy. Das filed his securities fraud class action Friday (docket 2:24-cv-02138) in U.S. District Court for New Jersey in Newark.

The plaintiff blames the stock’s decline on the revelatory reports that ensued following “materially false and misleading statements” that former Chairman-CEO Colin Angle and current Chief Financial Officer Julie Zeiler made during the regulatory period, said the complaint. The deception began after the Aug. 5, 2022, Amazon-iRobot announcement of the transaction, through Jan. 29, when the companies disclosed that the deal “could not proceed” due to “undue and disproportionate regulatory hurdles,” it said. Angle resigned from his roles Jan. 28. He remains an iRobot board member until his current term expires in May.

As a result of the defendants’ “wrongful acts and omissions,” and the “precipitous decline” in the market value of iRobot shares, Das and the class members have suffered “significant losses and damages,” said the complaint. The New Jersey resident bought his iRobot shares at "artificially inflated prices," and was damaged on "the revelation of the alleged corrective disclosures," it said.

The class action doesn’t name Amazon as a party. The stock, worth $59.54 on Aug. 5, 2022, the first trading day on which the transaction was announced, plunged to $15.50 on Jan. 29, when it was disclosed that the deal had fallen through.

The class action alleges that iRobot, Angle and Zeiler failed to disclose that Amazon’s iRobot buy “would place Amazon in a sufficiently dominant position” in the market for robotic vacuum cleaners, such that U.S. and European antitrust regulators were “unlikely” to approve it. The complaint also alleges that iRobot had conducted “inadequate due diligence” into the deal or “ignored significant risks weighing against the likelihood of regulatory approval,” it said.

Throughout the period in which Amazon and iRobot were working to close the transaction, iRobot “overstated the likelihood” for successfully completing the deal, said the complaint. As a result, iRobot’s public statements about the transaction “were materially false and misleading at all relevant times,” it said.

Angle and Zeiler “possessed the power and authority to control the contents" of iRobot’s SEC filings and news releases, said the complaint. They knew the SEC filings and news releases “to be misleading,” and they had “the ability and opportunity to prevent their issuance or to cause them to be corrected,” yet they didn't do so, it said.

Because of their access to material information available to them "but not to the public," Angle and Zeiler knew that the “adverse facts” of global regulatory pushback “were being concealed from the public,” and the complaint. They also knew that the “positive representations” being made about the acquisition were “materially false and misleading,” it said. Angle and Zeiler “are liable for the false statements and omissions,” it said.

Angle and Zeiler “had both the motive and opportunity to commit fraud,” said the complaint. They also had “actual knowledge of the misleading nature of the statements they made, or acted in reckless disregard of the true information known to them at the time,” it said. In so doing, they participated “in a scheme to defraud” investors and perpetuated a “deceit” on purchasers of iRobot stock, it said.