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”) KRNT In the United States District Court for the District of New Jersey for all persons and entities who have purchased or otherwise acquired Kornit security between February 17, 20,21 and July 5, 2020, inclusively (the “Class period”). Investors can apply to the Court until April 17, 2020 to be appointed lead plaintiff.
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This securities class-action is brought by all persons and entities who purchased or acquired Kornit ordinary share between February 17, 2020 and July 5, 2022 (inclusive) (the “Class period”). The claims alleged herein are against Kornit, as well as certain of its current and former senior executive officers (collectively “Defendants”) and arise out of Sections 10(b), 20(a), and Rule 10b-5 of the Securities Exchange Act of 1933 (the “Exchange Act”), along with the rule promulgated under it.
Kornit is a company that designs and manufactures industrial printing technologies for the textile, apparel and garment industries. The digital inkjets of the Company allow end users to print directly on fabric and garments. 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 sells and produces textile inks as well as other consumables to be used with its 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, known as KornitX. The Company offers, among others, automated production and workflow systems, inventory management and workflow automation.
Amazon.com, Inc., an e-commerce multinational, is the largest customer of the Company. Delta Apparel, Inc. (“Delta Apparel”), a leading manufacturer of activewear, lifestyle apparel, and Fanatics, Inc. (“Fanatics”), a digital sports platform, licensed sports merchandise provider, and a leader in the global sports industry, were two of Kornit’s largest customers during this Class Period. Kornit derives more than 60% its revenue from its top ten customers. Kornit’s goal to “become a $1 billion revenue Company in 2026” was based on the ambitious goal to keep these major customers and continue to grow their customer base.
Throughout the class period, Kornit continually touted its purported advantages in terms of technology and assured investors it faced little or no competition on the “direct to garment” printing market. The Company stated that there was a strong demand for digital printing systems and consumables 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 their workflow. Kornit also assured investors that a purportedly high demand for its products and services will enable the Company to retain its existing client base and attract new clients, limiting the risk of a large portion of revenues being concentrated in a few large customers.
All of these statements and others made during the class period were false. Kornit, and its senior executive knew, or at least recklessly disregarded the fact, that Kornit’s digital print business was plagued with severe quality control and customer service problems. Kornit lost market share due to these issues and deficiencies, which led to the Company losing revenue. Customers began to go elsewhere for their digital print 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. Delta Apparel, Fanatics, and other companies using this new, competitive technology reflect the widespread dissatisfaction among Kornit’s customers about the quality of the company’s products and its customer service. Kornit is likely to lose revenue from these two customers.
Kornit announced a net loss for the first quarter 2022 on May 11, 2022. This was despite exceeding expectations in terms of revenue. The Company’s revenue guidance for 2022’s second quarter was also significantly lower than analysts expected. Kornit blamed its disappointing guidance on a slowdown of orders from customers in the Company’s e-commerce sector. The Company also admitted that it knew for at least two previous quarters that one of its biggest customers, Delta Apparel had purchased digital printing systems from Kornit’s competitor. The price of Kornit shares fell by $33.3% or $18.78 as a result.
Kornit then announced on July 5th, 2022 after the close of the stock market, that the company would have a substantial revenue shortfall for the second half of 2022. Kornit’s revenue forecast for the second quarter was $56.4 to $59.4 millions, which is far below the $85 to $95 million revenue guidance that the Company gave less than two months ago, in May 2022. Kornit blamed the revenue shortfall on “a much slower pace of orders for direct-to garment (DTG), systems in the second quarter compared with our previous expectations.” The price of Kornit ordinary share fell by an additional $8.10, or 25.7%, as a result.
Plaintiffs and other class members have suffered significant damages and losses as a consequence of Defendants’ wrongdoing and omissions.
If you purchased or otherwise acquired Kornit shares and suffered a loss, are a long-term stockholder, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Melissa Fortunato by email at [email protected], telephone at (212) 355-4648, or by filling out this contact form. No cost or obligation is imposed on you.
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