A class action lawsuit was filed against Symbotic Inc. (SYM) by Levi & Korsinsky on August 14, 2024. The plaintiffs (shareholders) alleged that they bought SYM stock at artificially inflated prices between May 6, 2024, and July 29, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Symbotic stock during that period can click here to learn about joining the lawsuit.
Symbotic builds and operates fully automated robotic warehouses powered by AI (artificial intelligence). Symbotic enables large retailers, wholesalers, and food and beverage companies to move goods quickly and efficiently.
Symbotic’s claims about the company’s gross margin prospects in 2024 are at the heart of the lawsuit.
Symbotic’s Misleading Claims
According to the lawsuit, Symbotic and two of its senior officers (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about the potential for margin growth in the third quarter of FY 2024 and ancillary issues from SEC filings and related material.
For instance, during an earnings call early in the Class Period, the company’s CFO stated that the burden of passthrough costs and lower-margin innovation projects was weighing on the gross margin. However, he added that the company’s business model allowed it to be profitable even with a smaller number of active sites that generate recurring revenue.
Furthermore, during the same call, the CFO added that he expected the lower-margin projects to be completed by the second half of FY2024. He added that gross margins would start stabilizing from Q3.
However, subsequent events (discussed below) revealed that Symbotic and its executives were misleading investors about the lower-margin projects and their potential impact on the gross margins.
Plaintiffs’ Arguments
The plaintiffs maintain that the Defendants deceived investors by lying and withholding critical information about the company’s business and prospects during the Class Period. Importantly, the Defendants are accused of misleading investors about the company’s revenue and margin expectations.
The information became clear after the market closed on July 29, 2024, when Symbotic reported weaker-than-expected Q3 FY24 results. The primary reason for missing the targets was that the gross margin came in below expectations.
In particular, the company’s adjusted EBITDA (earnings before interest tax depreciation and amortization) missed the guidance by $13 million at the midpoint, falling by 46.4% compared to the prior year. Based on the poor Q3 results, Symbotic gave a dwindling outlook for Q4 FY24, which also came in below analysts’ expectations. Following the news, SYM stock fell 23.5% on July 30.
To conclude, Symbotic allegedly misled investors about its gross margin prospects for Fiscal 2024. Year-to-date, SYM stock has declined 52.5%, causing massive damage to shareholder returns.
