iLearningEngines, Inc. (AILE) Stock Drop Lawsuit Investigation (2024)
A class action lawsuit has been filed on behalf of investors who purchased or acquired shares of iLearningEngines, Inc. (NASDAQ: AILE) between April 22, 2024, and August 28, 2024. The lawsuit alleges that throughout the class period, iLearningEngines made false or misleading statements to investors and failed to disclose material adverse facts about the company’s business, operations, and prospects. This potential lawsuit seeks to help iLearningEngines, Inc. shareholders recover their losses.
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Why is iLearningEngines, Inc. (NASDAQ: AILE) stock dropping?
On Thursday, August 29, 2024, Hindenburg Research published a report claiming that “nearly all” of iLearningEngines’ revenue and expenses “seem to be run through an undisclosed related party, an unnamed ‘Technology Partner,’” and “the majority of iLearningEngines’ revenue doesn’t exist.”
The Hindenburg report states that iLearningEngines also has “no obvious industry presence, doesn’t name key customers or partners and does not appear to do the volume of business it claims.” For example, the company claims its Indian market has an annual revenue run rate of $216 million, but the amounts reported by its sole Indian subsidiary are actually around 99.4% less than what iLearningEngines purports, according to the Hindenburg report.
Following this news, shares of iLearningEngines plummeted over 54% in intraday trading on Thursday, August 29, 2024, causing significant harm to investors.
Will Joining a Potential iLearningEngines Class Action Lawsuit Cost Me Anything?
No. Participating in a potential securities class action lawsuit with our firm will not cost you anything out of pocket. If a lawsuit is filed and is successful down the line, the court has the discretion to award fair attorney’s fees out of a gross recovery.
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iLearningEngines went public in April 2024 via a SPAC merger with Arrowroot Acquisition Corp. The August 29, 2024 Hindenburg Research report highlights that “iLearningEngines was borderline insolvent when it merged with a desperate SPAC sponsor” and had just “$800,000 in cash and $22 million in debt prior to the merger.” As of August 2024, iLearningEngines has lost over 85% of its value since it IPO’ed via the SPAC merger.
SPACs, or special purpose acquisition companies, are commonly known as “blank check” shell companies. SPACs provide an alternative to the traditional IPO process, and serve the primary purpose of raising investor proceeds to eventually acquire a private company. Investors typically buy into a SPAC before it announces, or even decides, which private company it will attempt to acquire.
While SPAC investors have the potential to realize significant gains, they are also much more vulnerable to market volatility and other types of fraud. Investors may be vulnerable to a variety of SPAC fraud by sponsors, including:
- Misrepresenting material facts related to the SPAC or the company to be acquired;
- Failing to properly investigate or conduct due diligence on the company to be acquired; or
- Engaging in self-dealing or failing to disclose conflicts of interest with the acquisition company.
SPACs have recently come under SEC scrutiny and investor lawsuits against SPACs are on the rise. According to MarketWatch, many of these lawsuits allege SPAC directors failed to disclose sufficient information about the companies they intended to merge with.