A class action lawsuit was filed against Oddity Tech Ltd. (ODD) by Levi & Korsinsky on July 19, 2024. The plaintiffs (shareholders) alleged that they bought ODD stock at artificially inflated prices between July 19, 2023 and May 20, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Oddity Tech stock during that period can click here to learn about joining the lawsuit.
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Oddity Tech is a technology-enabled platform focused on developing solutions for the beauty and wellness industries. The company uses artificial intelligence (AI), molecular discovery, computer vision, and data science to develop its solutions. Oddity became a publicly listed company on July 19, 2023. The company’s claims about its business before and after the listing are at the heart of the complaint.
Oddity Tech’s Misleading Claims
According to the lawsuit, ODD and five of its senior officers and/or directors (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about the efficacy of the company’s AI technology, the extent to which it drove sales, and other issues from SEC filings and related material.
For instance, the defendants consistently claimed during the Class Period that ODD’s AI-powered technology platform was enabling a transformation of the global beauty and wellness industry. Further, Oddity and the defendants cited solid growth in financial metrics such as sales, net income, and adjusted EBITDA as proof of its resilient business model.
Additionally, in a press release dated March 5, 2024, Oddity’s CFO noted that the company was witnessing high customer repeat rates and was confident of meeting its Fiscal 2024 targets.
To summarize, the defendants made tall claims about the perceived growth in the company’s customer base and sales, backed by its solid platform. They allegedly misled investors about the repeat orders and sales trajectory.
Plaintiffs’ Arguments
The plaintiffs maintain that Oddity Tech and the Defendants deceived investors by lying and withholding important information about the company’s business practices and compliance policies during the Class Period. Importantly, the Defendants are accused of misleading investors by overstating the company’s growth metrics.
The information became clear on May 21, 2024, when NINGI Research released a report about Oddity’s malfeasance. NINGI cited talks with Oddity’s prior employees, who alleged that the AI technology was simply a questionnaire. Moreover, the former employees said that Oddity misled customers by making them enter into non-cancelable plans without their knowledge. This led to Oddity reporting high repeat rates even though the customers did not want the products.
NINGI also stated that it found hundreds of undisclosed lawsuits and multiple class action lawsuits filed against Oddity and its units in both Israel and the U.S. The lawsuits alleged unpaid bills and violation of consumer protection laws. ODD shares fell over 7% following the news.
To conclude, Oddity Tech misled investors about the company’s AI technology and capabilities and its impact on sales. Year to date, ODD stock has declined nearly 22%, causing damage to shareholder returns.
