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 will have until April 17th 2023 to request that the Court appoint them as the lead plaintiff.
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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 manufactures and designs industrial digital printing technology for the apparel, textile and apparel 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 sells and produces textile inks as well as other consumables to be used with its digital printers. Kornit provides equipment and customer services such as technical support, maintenance and repair through its customer support contract.
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.
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’s ten biggest customers generate more than 60 percent of its revenue. 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 claimed that its digital printing system, textile inks and consumables were highly demanded. It also offered services to customers for the maintenance and management of its digital printers and managing 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 announced a net loss for the first quarter 2022 on May 11, 2022. This was despite exceeding expectations in terms of revenue. 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. 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 announced, after the markets closed on July 5, 2022 that it would be reporting a significant shortfall in revenue during the second quarter 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. No cost or obligation is imposed on you.
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