by tyler | Aug 26, 2023 | Press Article
NEW YORK, Aug. 26, 2023 /PRNewswire/ — Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential claims against Party City Holdco Inc. (“Party City” or the “Company”) (NYSE: PRTY, OTC: PRTYQ) and reminds investors of the October 2, 2023 deadline to seek the role of lead plaintiff in a federal securities class action that has been filed against the Company.
If you suffered losses exceeding $100,000 investing in Party City stock or options between November 8, 2022 and June 9, 2023 and would like to discuss your legal rights, call Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310). You may also click here for additional information: www.faruqilaw.com/PRTYQ
There is no cost or obligation to you.
Faruqi & Faruqi is a leading minority and Woman-owned national securities law firm with offices in New York, Pennsylvania, California and Georgia.
As detailed below, the lawsuit focuses on whether the Company and its executives violated federal securities laws by making false and/or misleading statements and/or failing to disclose that: (1) affirmatively misrepresented that its capital resources “will be adequate to meet our liquidity needs for at least the next 12 months”; (2) omitted that there was substantial doubt about Party City’s ability to continue as a going concern; (3) downplayed the nature and extent of Party City’s then-existing liquidity problems; (4) omitted that Party City’s existing credit facilities were insufficient to satisfy its operational needs and that it was unable to obtain additional loans in the normal course of business; and (5) omitted that there was a material weakness in its internal control over financial reporting.
According to the complaint, throughout the Class Period, defendants Bradley Weston and Todd Vogensen made materially false and misleading statements and/or omissions concerning Party City’s liquidity position, capital resources, and borrowing capacity.
The truth began to emerge on January 6, 2023, when The Wall Street Journal published a short article stating for the first time that Party City was contemplating filing bankruptcy. The article stated in relevant part: “Party City Holdco Inc. is preparing to file for bankruptcy within weeks, according to people familiar with the matter, after the party-favor retailer’s cash dwindled and inflation dampened sales.”
Following this news, Party City’s stock price declined 50%, from a closing price of $0.358 on January 5, 2023, to a closing price of $0.179 on January 6, 2023.
Then, on January 17, 2023, Party City filed for bankruptcy pursuant to Chapter 11 of the U.S. Bankruptcy Code. The bankruptcy filings reveal that Party City was well aware of its liquidity problems and credit facility shortfall for several months.
Following this news, Party City’s stock price declined by 67% over a two-day span from a closing price of $0.374 on January 17, 2023, to a closing price of $0.121 on January 19, 2023.
Finally, on June 9, 2023, Party City filed a Form 8-K with the U.S. Securities and Exchange Commission admitting that: (i) the Q3 2022 10-Q should have included a “going concern” warning; (ii) there was a material weakness in internal control over financial reporting as of the date the Q3 2022 10-Q was filed; and (iii) Party City’s independent audit firm Ernst & Young LLP (“E&Y”) resigned as the company’s audit firm due to a disagreement with Party City management about its treatment of the going concern issue. The Form 8-K noted that the Q3 2022 10-Q contained a “material error,” that it “should no longer be relied on,” and that it “should be restated.”
Following this news, Party City’s stock price declined by 22% over the next three trading days from a closing price of $0.046 on June 9, 2023, to $0.036 on June 14, 2023.
The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.
Faruqi & Faruqi, LLP also encourages anyone with information regarding Party City’s conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
Attorney Advertising. The law firm responsible for this advertisement is Faruqi & Faruqi, LLP (www.faruqilaw.com). Prior results do not guarantee or predict a similar outcome with respect to any future matter. We welcome the opportunity to discuss your particular case. All communications will be treated in a confidential manner.
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by tyler | Aug 26, 2023 | Press Article
NEW YORK, Aug. 26, 2023 /PRNewswire/ — Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential claims against Shift4 Payments, Inc. (“Shift4” or the “Company”) (NYSE: FOUR) and reminds investors of the October 19, 2023 deadline to seek the role of lead plaintiff in a federal securities class action that has been filed against the Company.
If you suffered losses exceeding $100,000 investing in Shift4 stock or options between November 10, 2021 and April 18, 2023 and would like to discuss your legal rights, call Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310). You may also click here for additional information: www.faruqilaw.com/FOUR.
There is no cost or obligation to you.
Faruqi & Faruqi is a leading minority and Woman-owned national securities law firm with offices in New York, Pennsylvania, California and Georgia.
As detailed below, the lawsuit focuses on whether the Company and its executives violated federal securities laws by making false and/or misleading statements and/or failing to disclose that: (1) Shift4 had inadequate disclosure controls and procedures and internal control over financial reporting; (2) as a result, Shift4 failed to properly account for customer acquisition costs, thereby artificially inflating its net cash provided by operating activities; (3) accordingly, Shift4 would likely be forced to restate one or more of its previously issued financial statements; (4) Shift4 employed accounting maneuvers in connection with, among other things, its mass strategic buyout program and sponsor bank merchant settlement account, that were designed to present an inaccurate picture of, inter alia, the Company’s performance, its underlying business quality, and its earnings power; (5) all the foregoing, once revealed, was likely to negatively impact Shift4’s reputation and business; and (6) as a result, the Company’s public statements were materially false and misleading at all relevant times.
On October 21, 2022, Shift4 disclosed in a filing with the U.S. Securities and Exchange Commission that the Company’s third quarter 2021, full year 2021, first quarter 2022, and second quarter 2022 financial statements should no longer be relied upon and would need to be restated because of a material weakness in the Company’s financial controls, which had caused it to incorrectly treat “customer acquisition costs” as cash used in investing activities rather than cash used in operating activities in its Consolidated Statements of Cash Flows. As a result, Shift4 was forced to negatively revise its net cash provided by operating activities to $3 million (down from its originally reported $29.2 million), $30.8 million (down from its originally reported $37.1 million), and $70.8 million (down from its originally reported $85 million) for the year ended December 31, 2021, the three months ended March 31, 2022, and the six months ended June 30, 2022, respectively.
On this news, Shift4’s stock price fell $1.21 per share, or 2.67%, to close at $44.16 per share on October 24, 2022.
On April 19, 2023, Blue Orca Capital published a report addressing Shift4 (the “Blue Orca Report”). The Blue Orca Report alleged, among other things, that “Shift4 [is], in reality, a roll-up of low-tech POS systems and payment processors which is substantially less profitable, generates far less cash, and is materially more levered than investors are led to believe.” The Blue Orca Report further alleged that in 2022, “Shift4 engaged in a string of highly questionable and hyper-aggressive accounting maneuvers seemingly designed to keep the stock afloat, from cash flow manipulation to inexplicable distributor acquisitions that enabled it to capitalize a major component of COGS [cost of goods sold].” For example, the Blue Orca Report alleged, inter alia, that Shift4’s “buyout of 50% of its independent distributors”—i.e., in connection with its mass strategic buyout program—”and Q4 2022 cash account withdrawal” from its sponsor bank merchant settlement account “together inflated operating cash flow by 61%.”
On this news, Shift4’s stock price fell $5.95 per share, or 8.68%, to close at $62.59 per share on April 19, 2023.
The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.
Faruqi & Faruqi, LLP also encourages anyone with information regarding Shift4’s conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
Attorney Advertising. The law firm responsible for this advertisement is Faruqi & Faruqi, LLP (www.faruqilaw.com). Prior results do not guarantee or predict a similar outcome with respect to any future matter. We welcome the opportunity to discuss your particular case. All communications will be treated in a confidential manner.
SOURCE Faruqi & Faruqi, LLP
by tyler | Aug 26, 2023 | Press Article
NEW YORK, Aug. 26, 2023 /PRNewswire/ — Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential claims against Infinity Pharmaceuticals, Inc. (“Infinity” or the “Company”) (NASDAQ: INFI) and reminds investors of the October 16, 2023 deadline to seek the role of lead plaintiff in a federal securities class action that has been filed against the Company.
If you suffered losses exceeding $100,000 investing in Infinity stock or options between January 5, 2022 and July 24, 2023 and would like to discuss your legal rights, call Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310). You may also click here for additional information: www.faruqilaw.com/INFI.
There is no cost or obligation to you.
Faruqi & Faruqi is a leading minority and Woman-owned national securities law firm with offices in New York, Pennsylvania, California and Georgia.
As detailed below, the lawsuit focuses on whether the Company and its executives violated federal securities laws by making false and/or misleading statements and/or failing to disclose that: (1) Infinity overstated its prospects for a breast cancer treatment; (2) Infinity was overly optimistic about its breast cancer studies; (3) all the foregoing, once revealed, was likely to negatively impact Infinity’s business, financial results, and reputation; and (4) as a result, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis at all relevant times.
For over a year, Defendants pushed the false narrative that Infinity’s flagship product, eganelisib, was proceeding apace in its clinical studies as a treatment for breast cancer. Specifically, Infinity touted two clinical studies: (1) MARIO-4, a randomized, double-blind Phase 3 study; and (2) MARIO-P, a platform study to evaluate additional combinations and indications where eganelisib might increase the effectiveness of available therapies.
On February 23, 2023, before the stock market opened, Infinity announced via a webcast (the “Webcast”) that it had entered into a merger agreement with MEI Pharma, Inc. The proposed transaction was all stock, pursuant to which Infinity shareholders would receive shares of MEI common stock. Infinity would become a wholly-owned subsidiary of MEI, with outstanding equity post-closing being held 58% by MEI shareholders and 42% by Infinity shareholders.
During the Webcast, Defendant Perkins stated Infinity would “prioritize head and neck cancer.” No mention at all was made of breast cancer treatments. It was as if MARIO-4 and MARIO-P never existed, and breast cancer was never a priority for eganelisib treatment.
This pivot did not go unnoticed by the stock market, and the value of Infinity stock plummeted. Infinity stock had closed at $0.55 on February 22, 2023. The following day, on extraordinary volume of over 3 million shares, Infinity stock lost half its volume, closing at $0.28 per share. Typically, volume of shares traded on a daily basis was fewer than 500,000 shares. Infinity stock averaged over 2 million shares traded per day over the next week as the market absorbed the shocking news.
On February 21, 2023, Infinity’s market cap was around $50 million, with $40 million in cash and a pipeline of products. On February 24, 2023, Infinity had a $20 million market cap, trading at half its cash value and essentially allocating $0 value to its pipeline. The combined market caps of both Infinity and MEI was $50 million. David Usso, of MEI, stated on the Webcast that expected cash after the merger was expected to be $100 million. So the price at which the two companies were trading was equivalent to only half of cash on hand.
On July 24, 2023, Infinity announced that the merger had been terminated, because shareholders of the merging company voted against it. On this news, Infinity’s stock price fell $0.09, or 40%, to close at $.13 per share on July 24, 2023, thereby injuring investors further.
The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.
Faruqi & Faruqi, LLP also encourages anyone with information regarding Infinity’s conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
Attorney Advertising. The law firm responsible for this advertisement is Faruqi & Faruqi, LLP (www.faruqilaw.com). Prior results do not guarantee or predict a similar outcome with respect to any future matter. We welcome the opportunity to discuss your particular case. All communications will be treated in a confidential manner.
SOURCE Faruqi & Faruqi, LLP
by tyler | Aug 26, 2023 | Press Article
NEW YORK, Aug. 26, 2023 /PRNewswire/ — Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential claims against Comerica Incorporated (“Comerica” or the “Company”) (NYSE: CMA) and reminds investors of the October 20, 2023 deadline to seek the role of lead plaintiff in a federal securities class action that has been filed against the Company.
If you suffered losses exceeding $100,000 investing in Comerica stock or options between February 9, 2021 and May 29, 2023 and would like to discuss your legal rights, call Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310). You may also click here for additional information: www.faruqilaw.com/CMA.
There is no cost or obligation to you.
Faruqi & Faruqi is a leading minority and Woman-owned national securities law firm with offices in New York, Pennsylvania, California and Georgia.
As detailed below, the lawsuit focuses on whether the Company and its executives violated federal securities laws by making false and/or misleading statements and/or failing to disclose that: (1) Comerica failed to provide meaningful oversight over the vendors to whom it contracted out day-to-day operations of the Direct Express program, a system through which it is contracted to provide federal benefits to millions of Americans without bank accounts; (2) as a result of violations in the day-to-day operations of Direct Express, including handling fraud disputes and allowing sensitive data to be handled out of a vendor’s office in Pakistan, Comerica was not in compliance with the Federal Contract, and knew it was not in compliance; (3) Comerica knew and failed to disclose that it was in potential violation of Regulation E due to inadequate fraud prevention in the Direct Express program and responses to instanced of fraud; and (4) as a result, Defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages.
On May 30, 2023, American Banker issued an article titled “Comerica in ‘serious violation’ of Treasury’s Direct Express program”. The article states “Comerica Bank officials privately acknowledged significant compliance failures in their operation of a Treasury Department program that provides federal benefits on prepaid cards to millions of unbanked Americans.”
The article further states that Comerica executive said the bank faced “serious contract violation” for allowing fraud disputes and data on Direct Express cardholders to be handled out of a vendor’s office in Lahore, Pakistan, the documents show.
Personally identifiable information on veterans, Social Security and disability recipients were routinely shared and handled by i2c Inc., a vendor based in Redwood City, Calif., with an office in Lahore, Pakistan — in violation of the government contract, the Comerica executive said. The Treasury’s agreement with the bank states that all services provided “shall be performed in the United States or its territories.”
The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.
Faruqi & Faruqi, LLP also encourages anyone with information regarding Comerica’s conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
Attorney Advertising. The law firm responsible for this advertisement is Faruqi & Faruqi, LLP (www.faruqilaw.com). Prior results do not guarantee or predict a similar outcome with respect to any future matter. We welcome the opportunity to discuss your particular case. All communications will be treated in a confidential manner.
SOURCE Faruqi & Faruqi, LLP
by tyler | Aug 26, 2023 | Press Article
NEW YORK, Aug. 26, 2023 /PRNewswire/ –Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential claims against Mallinckrodt plc (“Mallinckrodt” or the “Company”) (NYSE: MNK) and reminds investors of the September 5, 2023 deadline to seek the role of lead plaintiff in a federal securities class action that has been filed against the Company.
If you suffered losses exceeding $100,000 investing in Mallinckrodt stock or options between June 17, 2022 and June 14, 2023 and would like to discuss your legal rights, call Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310). You may also click here for additional information: www.faruqilaw.com/MNK.
There is no cost or obligation to you.
Faruqi & Faruqi is a leading minority and Woman-owned national securities law firm with offices in New York, Pennsylvania, California and Georgia.
Mallinckrodt develops, manufactures, markets, and distributes specialty pharmaceutical products and therapies, including certain opioid products, in the U.S., Europe, the Middle East, Africa, and internationally.
In October 2020, Mallinckrodt filed for Chapter 11 bankruptcy protection while agreeing to settle its alleged role in the U.S. national opioid crisis for approximately $1.7 billion (the “Opioid Settlement”). As part of its Chapter 11 exit plan, Mallinckrodt agreed to make nine payments over eight years to an opioid-victims compensation trust (the “Trust”) for the Opioid Settlement. The Company made its first payment of $450 million to the Trust as it emerged from Chapter 11 bankruptcy protection in June 2022. The Company’s next payment of $200 million was due to the Trust in June 2023.
Despite its ongoing financial obligations to the Trust for the Opioid Settlement, since emerging from Chapter 11 bankruptcy protection, Mallinckrodt has repeatedly assured investors of the Company’s financial strength, including purported enhancements to its liquidity and balance sheet, as well as its overall prospects for continued financial stability and near- and long-term success.
The complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Mallinckrodt had overstated its financial strength, including purported enhancements to its liquidity and balance sheet, following its emergence from Chapter 11 bankruptcy protection; (ii) accordingly, the Company overstated its ability to timely make one or more payments to the Trust for the Opioid Settlement; (iii) all the foregoing negatively impacted Mallinckrodt’s ability and/or willingness to timely meet interest payment obligations on certain bonds; (iv) as a result of all the foregoing, the Company was at an increased risk of having to again file for Chapter 11 bankruptcy protection; and (v) as a result, the Company’s public statements were materially false and misleading at all relevant times.
On June 2, 2023, The Wall Street Journal reported that Mallinckrodt was again exploring bankruptcy as its next $200 million payment to the Trust for the Opioid Settlement came due.
On this news, Mallinckrodt’s ordinary share price fell $0.98 per share, or 40%, to close at $1.47 per share on June 5, 2023, the next trading day.
On June 15, 2023, Mallinckrodt disclosed in a Securities and Exchange Commission (‘SEC”) filing that it had determined not to make interest payments on two bonds due that day and may need to file for bankruptcy.
On this news, Mallinckrodt’s ordinary share price fell $0.39 per share, or 30.95%, to close at $0.87 per share on June 15, 2023.
On June 16, 2023, Mallinckrodt disclosed in an SEC filing that the Company and the Trust had agreed to extend the deadline for the Company’s $200 million payment to the Trust for the Opioid Settlement from June 16, 2023 to June 23, 2023, while reiterating that the Company may need to file for bankruptcy.
Then, on June 23, 2023, Mallinckrodt disclosed in an SEC filing that the Company and the Trust had again agreed to extend the deadline for the Company’s $200 million payment to the Trust from June 23, 2023 to June 30, 2023, while reiterating that the Company may still need to file for bankruptcy.
The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.
Faruqi & Faruqi, LLP also encourages anyone with information regarding Mallinckrodt’s conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
Attorney Advertising. The law firm responsible for this advertisement is Faruqi & Faruqi, LLP (www.faruqilaw.com). Prior results do not guarantee or predict a similar outcome with respect to any future matter. We welcome the opportunity to discuss your particular case. All communications will be treated in a confidential manner.
SOURCE Faruqi & Faruqi, LLP
by tyler | Aug 26, 2023 | Press Article
NEW YORK, Aug. 26, 2023 /PRNewswire/ — Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential claims against Applied Digital Corporation (“Applied Digital” or the “Company”) (NASDAQ: APLD) and reminds investors of the October 11, 2023 deadline to seek the role of lead plaintiff in a federal securities class action that has been filed against the Company.
If you suffered losses exceeding $100,000 investing in Applied Digital stock or options between April 13, 2022 and July 26, 2023 and would like to discuss your legal rights, call Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310). You may also click here for additional information: www.faruqilaw.com/APLD.
There is no cost or obligation to you.
Faruqi & Faruqi is a leading minority and Woman-owned national securities law firm with offices in New York, Pennsylvania, California and Georgia.
The complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Applied Digital had overstated the profitability of its datacenter hosting business and its ability to successfully transition into a low-cost AI Cloud services provider; (ii) Applied Digital’s Board of Directors was not independent within the meaning of NASDAQ listing rules; (iii) accordingly, Applied Digital had overstated the efficacy of its business model and failed to maintain proper corporate governance standards; (iv) the foregoing, once revealed, was likely to subject the Company to significant financial and/or reputational harm; and (v) as a result, the Company’s public statements were materially false and misleading at all relevant times.
In April 2022, Applied Digital conducted its initial public offering (“IPO”), issuing 8 million shares of common stock priced at $5.00 per share for a total of approximately $40 million in proceeds. The primary underwriter of the IPO was B. Riley Securities, Inc. (“B. Riley Securities”), an investment bank and subsidiary of the diversified financial services platform B. Riley Financial, Inc. (“B. Riley Financial”). On April 13, 2022, pursuant to the offering documents issued in connection with the IPO (the “Offering Documents”), Applied Digital’s securities began trading on the Nasdaq Global Select Market (“NASDAQ”).
The Offering Documents described several close connections between Applied Digital and B. Riley. For example, in the “conflicts of interest” section of the IPO Prospectus, Applied Digital stated that, in August 2021, the Company’s Chief Executive Officer (“CEO”), Defendant Wesley Cummins (“Cummins”), sold a majority interest in a registered investment adviser controlled by Cummins to B. Riley Financial, and thereafter became President of B. Riley Asset Management. At the time of the IPO, Cummins also served as the CEO and President of B. Riley Capital Management, LLC. Further, the IPO Prospectus stated that two members of the Board, Chuck Hastings (“Hastings”) and Virginia Moore (“Moore”), maintained similarly close connections to B. Riley. Specifically, at the time of the IPO, Hastings served as the CEO of B. Riley Wealth Management, Inc. and Moore was married to the CEO of B. Riley Securities.
As a company publicly traded on the NASDAQ, Applied Digital is required to comply with Listing Rule 5605(b)(2), which states that a majority of the Company’s board of directors (the “Board”) must be comprised of independent directors. Nasdaq Listing Rule 5606(a)(2) defines an independent director as “a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.” Notwithstanding the close ties between Applied Digital and B. Riley, the prospectus issued in connection with the IPO (the “IPO Prospectus”) nonetheless assured investors that Applied Digital had “structured [its] Board composition and corporate governance in order to meet the requirements of the [NASDAQ]”.
On May 15, 2023, Applied Digital announced that it was launching cloud service to “[e]mpower [a]rtificial [i]ntelligence [a]pplications”. Eight days later, on May 23, 2023, Applied Digital entered into a loan and security agreement with B. Riley Commercial Capital, LLC and B. Riley Securities. The agreement, the purpose of which Applied Digital claimed was to supply “additional liquidity to fund the buildout of the Company’s recently announced AI cloud platform and datacenters by the Company,” provided for a term loan in the principal amount of up to $50 million, with an interest rate of 9.00% per annum, and a maturity date of May 23, 2025. However, Applied Digital repaid the total balance of the loan nearly two years ahead of its contractual maturity, a timeframe that corresponded with B. Riley’s own efforts to finance its recent acquisition of the holding company Franchise Group, Inc.
In July 2023, market analysts began scrutinizing Applied Digital’s business model as well as assembling the various connections between Applied Digital and B. Riley into a cogent picture. First, on July 6, 2023, market analysts Wolfpack Research (“Wolfpack”) and The Bear Cave (“Bear Cave”) published short reports on Applied Digital. The Wolfpack report raised questions about the viability of the Company’s business model, stating, for example, that the Company “pumped up its stock in May by claiming to pivot from a floundering business hosting bitcoin miners, to becoming a low-cost AI Cloud service provider,” and “[t]he explosion of interest in AI after the emergence of Chat GPT has predictably attracted the worst promoters []to peddle fake AI wares to credulous investors, and our analysis indicates that APLD is one of these grifters because it is not an AI company[.]” The Bear Cave report, for its part, detailed Applied Digital’s problematic corporate history, alleging that “Applied Digital relies on puffery over substance and is a perfect case study on our market’s bizarre underbelly of reverse mergers, microcaps, and shell companies.”
Following publication of the Wolfpack and Bear Cave short reports, Applied Digital’s stock price fell $1.27 per share, or 14.16%, to close at $7.70 per share on July 6, 2023.
Finally, on July 26, 2023, The Friendly Bear published a short report on Applied Digital. The Friendly Bear report expressed the view that B. Riley “is controlling managerial decisions at Applied Digital to the detriment of Applied Digital shareholders”; that Applied Digital’s board does not “meet[] the independence requirements under Nasdaq rules and . . . is essentially controlled by B. Riley.” The Friendly Bear report also alleged that clear conflicts of interest undermined the Company’s purported investigation into sexual harassment claims made against Defendant Cummins the previous month, noting that the manner in which the claims were summarily dismissed by Applied Digital’s Audit Committee could subject Applied Digital to “significant legal blowback.”
Following publication of the Friendly Bear Report, Applied Digital’s stock price fell $0.60 per share, or 6%, over the following two trading sessions, to close at $9.40 per share on July 28, 2023.
The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.
Faruqi & Faruqi, LLP also encourages anyone with information regarding Applied Digital’s conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
Attorney Advertising. The law firm responsible for this advertisement is Faruqi & Faruqi, LLP (www.faruqilaw.com). Prior results do not guarantee or predict a similar outcome with respect to any future matter. We welcome the opportunity to discuss your particular case. All communications will be treated in a confidential manner.
SOURCE Faruqi & Faruqi, LLP
