Pomerantz Defeats Motion to Dismiss in In re STMicroelectronics Inc. Sec. Litig.
On September 15, 2025, U.S. District Judge Alvin K. Hellerstein of the Southern District of New York sustained investors’ securities fraud claims against semiconductor manufacturer STMicroelectronics N.V. (“STM”), denying the defendants’ motion to dismiss the case in its entirety.
The decision allows the lawsuit, which alleges that STM, its CEO Jean-Marc Chery, and its CFO Lorenzo Grandi misled the public about STM’s financial health, to proceed into discovery.
This victory is noteworthy as it stands in contrast to the two other recent securities cases brought against semiconductor companies that were dismissed at the pleading stage. The result underscores the strength of the firm’s investigation and its ability to marshal compelling facts from multiple sources, including confidential witnesses and financial analysis.
A Tale of a False Rosy Picture
Headquartered in Switzerland, STM is a publicly-traded company on the New York Stock Exchange that manufactures semiconductor chips and other electronics used in automotive, computer, and industrial applications. The automotive market drives the plurality of STM’s revenue.
Following a temporary, pandemic-induced surge in demand, the global semiconductor market began to cool down in late 2022. Despite this industry-wide trend and bleaker reports from industry groups, competitors, and suppliers, the defendants continued to paint a rosy picture for investors. Throughout 2023 and 2024, the defendants routinely stated that market demand was solid and strengthening, driven by the automotive sector, when in fact, it was deteriorating. The defendants claimed that
they had strong visibility into market demand, and the company’s inventory backlog was declining. An inventory backlog is a key indicator of strong demand when it is low.
However, the complaint alleges that these public representations were profoundly at odds with the internal reality at STM. The company actually faced a significant deterioration in its business, characterized by weakening demand and a growing inventory glut. To mask this decline, the defendants allegedly resorted to “channel stuffing”— providing excessive discounts to customers to artificially inflate sales, decrease inventory on the books, and conceal the true state of demand. The truth began to emerge in April 2024, when STM started announcing decreased revenue targets, causing its stock price to plummet from over $42 per share to under $40 following the announcements. However, the company never came clean and instead continued to tell investors that the financial picture in its industrial and automotive segments would improve as the year progressed. But on July 25, 2024, the company disclosed that it had experienced lower than expected revenue in the automotive segment and a decline in industrial, and revised its fiscal year revenue guidance downward, causing the stock price to drop to just over $33. On October 31, 2024, the company announced cost-cutting measures and again guided revenue below analyst consensus. On this news, the stock dropped to under $26.
Pomerantz’s Investigation Uncovered Internal Reality
Pomerantz’s success in defeating the motion to dismiss hinged on its ability to present a compelling narrative that directly contradicted STM’s public statements. The complaint detailed how senior executives, including the Chief Executive Officer, were repeatedly warned that the market
was slowing globally, that STM was not immune to this trend, and not to misrepresent information to the contrary to investors.
The investigation also uncovered that objections were raised internally by a former senior executive, serving as a confidential witness, regarding the company’s use of channel stuffing to conceal weakening demand by providing excessive discounts to customers to artificially inflate sales. This account was corroborated by other confidential witnesses who confirmed a rapid decline in customer
orders, an increase in inventory, and the hiring freeze in response to the worsening financial reality. Furthermore, Pomerantz’s analysis of STM’s financial results also showed indicators of channel stuffing, including a drastic decrease in revenues from distributors relative to revenue from original equipment manufacturers.
The defendants attempted to sidestep these powerful allegations by attacking the credibility of the confidential witnesses. Judge Hellerstein rejected these arguments, finding that the attacks are inappropriate at this stage of the litigation and cannot serve as a valid basis to dismiss a complaint.
Pomerantz and Plaintiffs Prevail
In his ruling, Judge Hellerstein systematically dismantled the defendants’ primary legal shields. The defendants argued that their misleading statements were protected by the Private Securities Litigation Reform Act’s (PSLRA) “safe harbor” for forward-looking statements. The Court disagreed for two critical reasons. First, it found that many of the challenged statements were about then-resent- day facts, such as market conditions at the time of the statement, which are not covered by the safe harbor. Second, the Court held that the plaintiffs alleged plausibly that the defendants’ statements as to STM’s growth and inventory were made with actual knowledge of their falsity.
The Court also agreed with Pomerantz that the company’s risk disclosures in its SEC filings were themselves misleading. STM warned investors of hypothetical risks, such as reduced demand and high inventory levels, without disclosing that these risks had, in fact, already materialized. Citing well-established precedent, the Court affirmed that “a company’s purported risk disclosures are misleading where the company warns only that a risk may impact its business when that risk has already materialized.” The boilerplate, “kitchen-sink” disclaimers accompanying STM’s annual report were found to be insufficient to protect the defendants.
Compared to the two other semiconductor manufacturer cases that were dismissed recently, Judge Hellerstein found the confidential witness allegations in the STM action to be much stronger and that STM provided less meaningful disclaimers and disclosures. The denial of the motion to dismiss in full paves the way for the case to move forward, allowing Pomerantz to seek recovery for harmed STM investors. Led by Partner Omar Jafri, the litigation team also includes Of Counsel Brian P. O’Connell and Associate Adam Jiang.