Applied Digital Corporation Class Action Lawsuit - APLD

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Case Summary

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The Applied Digital class action lawsuit seeks to represent purchasers or acquirers of Applied Digital Corporation (NASDAQ: APLD) securities between April 13, 2022 and July 26, 2023, inclusive (the “Class Period”).  Captioned McConnell v. Applied Digital Corporation, No. 23-cv-01805 (N.D. Tex.), the Applied Digital class action lawsuit charges Applied Digital and certain of its top executive officers with violations of the Securities Exchange Act of 1934.

If you suffered substantial losses and wish to serve as lead plaintiff of the Applied Digital class action lawsuit, please provide your information in the form on this page.  You can also contact attorney J.C. Sanchez of Robbins Geller by calling 800/449-4900 or via e-mail at jsanchez@rgrdlaw.com.  Lead plaintiff motions for the Applied Digital class action lawsuit must be filed with the court no later than October 11, 2023.

CASE ALLEGATIONS: Applied Digital designs, develops, and operates datacenters in North America, and provides artificial intelligence (“AI”) cloud services, computing datacenter hosting, and crypto datacenter hosting services.  In April 2022, Applied Digital conducted its initial public offering (“IPO”), raising approximately $40 million.  The IPO offering documents described several close connections between Applied Digital and B. Riley Securities (the primary IPO underwriter), including that in August 2021, Applied Digital’s CEO and defendant Wesley Cummins sold a majority interest in a registered investment adviser controlled by Cummins to B. Riley Financial, and thereafter became President of B. Riley Asset Management.

The Applied Digital class action lawsuit alleges that defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that: (i) Applied Digital had overstated the profitability of its datacenter hosting business and its ability to successfully transition into a low-cost AI cloud services provider; (ii) Applied Digital’s Board of Directors was not independent within the meaning of NASDAQ listing rules; (iii) accordingly, Applied Digital had overstated the efficacy of its business model and failed to maintain proper corporate governance standards; and (iv) the above, once revealed, was likely to subject Applied Digital to significant financial and/or reputational harm.

On July 6, 2023, market analysts Wolfpack Research and The Bear Cave published short reports on Applied Digital.  The Wolfpack report raised questions about the viability of Applied Digital’s business model, stating that Applied Digital “pumped up its stock in May by claiming to pivot from a floundering business hosting bitcoin miners, to become a low-cost AI Cloud service provider,” and “[t]he explosion of interest in AI after the emergence of Chat GPT has predictably attracted the worst promoters . . . to peddle fake AI wares to credulous investors, and our analysis indicates that [Applied Digital] is one of these grifters because it is not an AI company.”  The Bear Cave report detailed Applied Digital’s problematic corporate history, alleging that “Applied Digital relies on puffery over substance and is a perfect case study on our market’s bizarre underbelly of reverse mergers, microcaps, and shell companies.”  On this news, the price of Applied Digital stock fell more than 14%.

Then, on July 26, 2023, The Friendly Bear published a short report on Applied Digital and expressed the view that B. Riley “is controlling managerial decisions at Applied Digital to the detriment of Applied Digital shareholders” and that Applied Digital’s Board of Directors does not “meet[] the independence requirements under Nasdaq rules and . . . is essentially controlled by B. Riley.”  The Friendly Bear report also alleged that clear conflicts of interest undermined Applied Digital’s purported investigation into sexual harassment claims made against defendant Cummins the previous month, noting that the manner in which the claims were summarily dismissed by Applied Digital’s Audit Committee could subject Applied Digital to “significant legal blowback.”  On this news, the price of Applied Digital stock fell 6% over two trading sessions, further damaging investors. 

THE LEAD PLAINTIFF PROCESS: The Private Securities Litigation Reform Act of 1995 permits any investor who purchased or acquired Applied Digital securities during the Class Period to seek appointment as lead plaintiff of the Applied Digital class action lawsuit.  A lead plaintiff is generally the movant with the greatest financial interest in the relief sought by the putative class who is also typical and adequate of the putative class.  A lead plaintiff acts on behalf of all other class members in directing the Applied Digital class action lawsuit.  The lead plaintiff can select a law firm of its choice to litigate the Applied Digital class action lawsuit.  An investor’s ability to share in any potential future recovery is not dependent upon serving as lead plaintiff of the Applied Digital class action lawsuit.

ABOUT ROBBINS GELLER RUDMAN & DOWD LLP: Robbins Geller Rudman & Dowd LLP is one of the world’s leading complex class action firms representing plaintiffs in securities fraud cases.  The Firm is ranked #1 on the most recent ISS Securities Class Action Services Top 50 Report for recovering more than $1.75 billion for investors in 2022 – the third year in a row Robbins Geller tops the list.  And in those three years alone, Robbins Geller recovered nearly $5.3 billion for investors, more than double the amount recovered by any other plaintiffs’ firm.  With 200 lawyers in 10 offices, Robbins Geller is one of the largest plaintiffs’ firms in the world and the Firm’s attorneys have obtained many of the largest securities class action recoveries in history, including the largest securities class action recovery ever – $7.2 billion – in In re Enron Corp. Sec. Litig.

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