Bragar Eagel & Squire, P.C., a nationally recognized stockholder rights law firm, reminds investors that a class action lawsuit has been filed against Kornit Digital Ltd. (“Kornit” or the “Company”) KRNT In the United States District Court for the District of New Jersey for all persons and entities who have purchased or otherwise acquired Kornit security between February 17, 20,21 and July 5, 2020, inclusively (the “Class period”). Investors can apply to the Court until April 17, 2020 to be appointed lead plaintiff.
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This securities class-action is brought by all persons and entities who purchased or acquired Kornit ordinary share between February 17, 2020 and July 5, 2020, inclusively (the “Class Period”) The claims asserted in this action are brought against Kornit as well some of the Company’s former and current senior executives (“Defendants”) under Sections 10b and 20a of the Securities Exchange Act of 1939 (the “Exchange Act”), and Rule 10b-5 promulgated pursuant to it.
Kornit manufactures and designs industrial digital printing technology for the apparel, textile and apparel industries. Digital inkjet printers from the Company enable users to print direct-to garment (“DTG”) as well as direct-to fabric (“DTF”) In DTG printing images and designs can be printed directly on textiles, such as apparel and clothing. In DTF printing, large rolls of fabric pass through wide inkjet printers that print images and designs directly onto swaths of fabric that are then cut and sewn into a product, and can be used in the fashion and home décor industries. Kornit produces and sells textile dyes, inks, and other consumables that are used in digital printers. Kornit offers customer assistance, equipment services, and technical support for its printers through customer support contracts.
During the class period, the company began to offer software services, such as a complete suite of fulfillment and production solutions called KornitX. Through this, the company provides automated production systems, workflow management, and inventory management.
Amazon.com, Inc., a multinational ecommerce company, is the Company’s biggest customer. Delta Apparel, Inc. (“Delta Apparel”), a leading manufacturer of activewear, lifestyle apparel, and Fanatics, Inc. (“Fanatics”), a digital sports platform, licensed sports merchandise provider, and a leader in the global sports industry, were two of Kornit’s largest customers during this Class Period. Kornit’s ten biggest customers generate more than 60 percent of its revenues. Kornit had to retain its major customers, as well as grow the customer base to reach its ambitious goal of becoming a $1 Billion Revenue Company by 2026.
Throughout Class Period, Kornit repeatedly emphasized the supposed competitive advantages of its technology. Kornit assured investors that there was virtually no significant competition in the market for “direct-to garment” printing. The Company claimed that its digital printing system, textile inks and consumables were highly demanded. It also offered services to customers for the maintenance and management of its digital printers and managing customer workflow. Kornit also assured investors that a purportedly high demand for its products and services will enable the Company to retain its existing client base and attract new clients, limiting the risk of a large portion of revenues being concentrated in a few large customers.
These statements, and many others throughout the Class Period, were false. Kornit’s senior executives and management knew or, at the very least, recklessly ignored, that their digital printing business suffered from severe quality control issues and poor customer service. Kornit ceded market share to its competitors because of these problems and deficiencies. This, in turn led to a decline in revenue for the Company as customers moved elsewhere to get their digital printing done. These misrepresentations caused Kornit’s ordinary shares to trade at artificially inflated prices during the Class Period.
Investors began to learn the truth on March 28, 2022, when Delta Apparel and Fanatics—two of Kornit’s major customers—announced that for months they had collaborated with one of Kornit’s principal competitors to develop a new digital printing technology that directly competed with products and services Kornit offered. Delta Apparel said that this new technology was already in place at four of its digital print facilities, and they had plans to extend it further. Delta Apparel, Fanatics, and other companies using this new technology reflect the widespread dissatisfaction among Kornit’s customers about the quality of the company’s products and its customer service. Kornit is likely to lose revenue from these two customers.
Kornit, on May 11th, 2022 reported a loss of $5.2M for the first three months of 2022 despite having exceeded analyst expectations. The prior period had seen a profit $5.1M. The Company’s revenue guidance for 2022’s second quarter was also significantly lower than analysts expected. Kornit blamed its disappointing guidance on a slowdown of orders from customers in the Company’s e-commerce sector. The Company also admitted that it knew for at least two previous quarters that one of its biggest customers, Delta Apparel had purchased digital printing systems from Kornit’s competitor. These disclosures caused the price of Kornit’s ordinary shares to drop by $18.78 or 33.3%.
Kornit then announced on July 5, 2022 that the company would have a substantial revenue shortfall for the second half of 2022. Kornit’s revenue forecast for the second quarter was $56.4 to $59.4 millions, which is far below the $85 to $95 million revenue guidance that the Company gave less than two months ago, in May 2022. Kornit blamed the revenue shortfall on “a much slower pace of orders for direct-to garment (DTG), systems in the second quarter compared with our previous expectations.” The price of Kornit ordinary share fell by an additional $8.10, or 25.7%, as a result.
Plaintiff and the other members of the Class have suffered substantial losses and damages as a result Defendants’ wrongful acts and/or omissions and the precipitous drop in the value of the Company’s shares.
If you purchased or otherwise acquired Kornit shares and suffered a loss, are a long-term stockholder, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Melissa Fortunato by email at [email protected], telephone at (212) 355-4648, or by filling out this contact form. You are under no obligation or cost.
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