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”) (NASDAQ: KRNT) in the United States District Court for the District of New Jersey on behalf of all persons and entities who purchased or otherwise acquired Kornit securities between February 17, 2021 and July 5, 2022, both dates inclusive (the “Class Period”). Investors can apply to the Court until April 17, 2023 for appointment as the lead plaintiff in the case.
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This securities class action is brought on behalf of all persons or entities that purchased or otherwise acquired Kornit ordinary shares between February 17, 2021 and July 5, 2022, inclusive (the “Class Period”). The claims asserted herein are alleged against Kornit and certain of the Company’s current and former senior executives (collectively, “Defendants”), and arise under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5, promulgated thereunder.
Kornit is a company that designs and manufactures industrial printing technologies for the textile, apparel and garment industries. The Company’s digital inkjet printers enable end-users to print both direct-to-garment (“DTG”) and direct-to-fabric (“DTF”). In DTG, images and designs are printed directly on finished textiles like clothing and apparel. 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 this period, the Company began offering its customers software services. This included a set of end-toend production and fulfillment solutions called KornitX. The Company offers, among others, automated production and workflow systems as well as inventory management.
The Company’s largest customer is multinational e-commerce company, Amazon.com, Inc. (“Amazon”). Among the largest of Kornit’s other customers during the Class Period were Delta Apparel, Inc. (“Delta Apparel”), a leading provider of activewear and lifestyle apparel products, and Fanatics, Inc. (“Fanatics”), a global digital sports platform and leading provider of licensed sports merchandise. Kornit derives more than 60% its revenue from its top ten customers. Accordingly, it was critically important for Kornit to maintain those major customers as well as continue to grow its customer base in order to achieve the Company’s ambitious goal of “becoming a $1 billion revenue company in 2026.”
Throughout the Class Period, Kornit repeatedly touted the purported competitive advantages provided by its technology and assured investors that it faced virtually no meaningful competition in the “direct-to-garment” printing market. The Company stated that there was a strong demand for digital printing systems and consumable products such as textile dyes. They also claimed to provide services to its customers in order to maintain, manage and manage their digital printers as well as manage customer workflow. Kornit further assured investors that the purportedly strong demand for the Company’s products and services would enable it to maintain its existing customer base and attract new customers that would limit the risks associated with a substantial portion of its revenues being concentrated among a small number of large customers.
All of these statements and others made during the class period were false. In truth, Kornit and its senior executives knew, or at a minimum, recklessly disregarded, that the Company’s digital printing business was plagued by severe quality control problems and customer service deficiencies. Those problems and deficiencies caused Kornit to cede market share to competitors, which, in turn, led to a decrease in the Company’s revenue as customers went elsewhere for their digital printing needs. Due to these false representations, Kornit ordinary share prices were artificially inflated throughout 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. The utilization of this new, competing technology by Delta Apparel and Fanatics reflected the widespread dissatisfaction of Kornit’s major customers with the Company’s product quality and customer service, and meant that Kornit would likely lose revenue from two of its most important 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 also issued revenue guidance for the second quarter of 2022 that was significantly below analysts’ expectations. Kornit attributed its disappointing guidance to a slowdown in orders from the Company’s customers in the e-commerce segment. Kornit also acknowledged that for the past two quarters it had known that Delta Apparel was one of Kornit’s largest customers. They purchased digital printing equipment from a Kornit rival. The price of Kornit shares fell by $33.3% or $18.78 as a result.
Kornit then announced on July 5, 2022 that the company would have a substantial revenue shortfall for the second half of 2022. Kornit had previously provided a revenue guide of between $85 and $95 millions for the second half of 2022. However, this was less than two month earlier in May. Kornit attributed the substantial revenue miss to “a significantly slower pace of direct-to-garment (DTG) systems orders in the second quarter as compared to our prior expectations.” As a result of these disclosures, the price of Kornit ordinary shares declined by an additional $8.10 per share, or 25.7%.
As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s shares, Plaintiff and other Class members have suffered significant losses and damages.
You can contact Brandon Walker and Melissa Fortunato 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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