A class action lawsuit was filed against Sprinklr, Inc. (CXM) by Levi & Korsinsky on August 13, 2024. The plaintiffs (shareholders) alleged that they bought CXM stock at artificially inflated prices between March 29, 2023 and June 5, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Sprinklr stock during that period can click here to learn about joining the lawsuit.
Sprinklr is an enterprise software company that offers an advanced AI-backed unified customer experience management platform.
CXM’s Misleading Claims
According to the lawsuit, Sprinklr and two of its senior officers (Individual Defendants) are accused of deceiving investors by lying and withholding crucial information about the company’s business and its prospects during the Class Period. Particularly, they allegedly omitted truthful information about the implementation of their expansion plans in the CCaaS (Contact Center as a Service) market and the growth slowdown from SEC filings and related material.
For instance, during a quarterly earnings call at the beginning of the Class Period, Sprinklr’s CEO Ragy Thomas said that the company is witnessing success as a “radical disruptor in the CCaaS space.” He highlighted the company’s innovation in this market, as reflected in the addition of more than 100 features, including predictive intelligence, AI-backed quality management, and outbound voice dialing, to its service offering.
Further, during the earnings call on September 6, 2023, the CEO stated that despite an uncertain macro backdrop, the company is efficiently managing its go-to-market strategy, productivity, and execution. In fact, he attributed the customer growth to CXM’s AI investments and the CCaaS opportunity. Finally, in an interview with Barclays Bank in December 2023, the company’s CFO Manish Sarin expressed confidence in Sprinklr’s prospects in the CCaaS market.
In contrast to the company’s upbeat commentary about its business, subsequent events (discussed below) revealed that CXM allegedly misled investors about its growth story.
Plaintiffs’ Arguments
The plaintiffs maintain that the Defendants made false and misleading public statements about the company’s growth prospects throughout the Class Period.
The truth came out in events between December 6, 2023 and June 5, 2024. In the Q3 earnings call on December 6, 2023, the company disclosed a sequential decline in the total number of customers spending over $1 million, citing macroeconomic challenges. While the company reported “strong” Q3 results, it lowered its growth estimates for Fiscal 2025 (ending January 31, 2025) due to subscription renewal pressures triggered by macro headwinds and the “over-rotation” of sales to its CCaaS market.
The matter became more clear on June 5, 2024, when the company announced its Q1 FY25 results and revealed its “significantly reduced growth expectations,” notably slashing its Fiscal 2025 growth estimates. Yet again, Sprinklr blamed the poor outlook on the decline in customer retention in its core business and macro challenges. CXM shares fell more than 15% on June 6 in reaction to the weak outlook.
To conclude, Sprinklr allegedly misled investors about its prospects in the CCaaS market. Consequently, CXM stock has declined over 37% year-to-date, causing damage to shareholder returns.
