A class action lawsuit was filed against UiPath, Inc. (PATH) by Levi & Korsinsky on June 20, 2024. The plaintiffs (shareholders) alleged that they bought PATH stock at artificially inflated prices between December 1, 2023 and the close of trading on May 29, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought UiPath stock during that period can click here to learn about joining the lawsuit.
UiPath is a technology company that offers robotic process automation (RPA) solutions and AI-powered enterprise automation technology. As of April 30, UiPath had 10,800 customers, including 2,092 customers with over $100,000 ARR (annual recurring revenue).
UiPath’s Misleading Claims
According to the lawsuit, UiPath and three of its current and/or former senior officers (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about certain business strategies from SEC filings and related material.
For instance, during the Class Period, management consistently stated that they gave importance to customers’ needs and launched newer versions of the company’s business automation platform to suit their requirements. The co-CEO (individual defendant) also noted the importance of AI in UiPath’s offerings. He mentioned in one of the press releases that the new platform, 2023.10, has AI capabilities that drive enhanced productivity, innovation, and business performance for customers.
Moreover, the CFO noted in an earnings call that the company was focusing on customers with a higher likelihood of buying its products and that the strategy was paying off in terms of customer quality and deal quality.
Plaintiffs’ Arguments
The plaintiffs maintain that UiPath and the Defendants deceived investors by lying and withholding important information about the company’s business practices and prospects during the Class Period. Importantly, the defendants are accused of misleading investors about the success of UiPath’s turnaround strategy.
The truth was revealed on May 29, after the markets closed, when the company released its Q1 FY25 results. The company cut its full-year Fiscal 2025 revenue outlook by 10% to the range of $1.405 to $1.410 billion. The news dragged down PATH shares by 34% on May 30.
In the earnings call following the results, the founder and CIO stated that the poor results and revised guidance were due to the fact that the execution of the turnaround strategy was not going as expected and the investments were not bearing fruit. Instead, the enhanced investments were putting pressure on the company’s margins, which also needed to be dealt with appropriately.
Furthermore, the chief innovation officer noted that the company faced contract execution challenges, especially for large deals. He added that there was a need to improve the execution strategy to see better results in terms of product scaling. Simultaneously, the company announced the abrupt exit of its then-CEO and reinstated the founder and former CEO to the post.
Overall, the guidance cut and the sudden departure of the CEO reflected that the company’s prior claims about the prospects of its business were misleading. Unfortunately, owing to all these events, PATH stock has plunged 51.5% year-to-date, causing massive damage to shareholders’ returns.
