A class action lawsuit was filed against Symbotic Inc. (SYM) by Levi & Korsinsky on December 3, 2024. The plaintiffs (shareholders) alleged that they bought SYM stock at artificially inflated prices between February 8, 2024, and November 26, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Symbotic stock during that period can click here to learn about joining the lawsuit.
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Symbotic operates as an American robotics warehouse automation company. The company offers automated warehouse solutions for clients, enhancing their supply chain systems. The company has been in the news lately for its acquisition of American big box retailer Walmart’s (WMT) advanced systems and robotics operations for $200 million in cash.
The company’s claims of solid revenue growth amid faulty revenue recognition techniques are at the heart of the current complaint.
Symbotic’s Misleading Claims
According to the lawsuit, Symbotic and three of its senior officers (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about the efficacy of the company’s internal controls from SEC filings and related material.
For instance, the company and the defendants consistently reiterated that the financial reporting, and internal controls and procedures were in place. The CEO and CFO claimed that for the quarterly reports filed for Q1, Q2, and Q3 of Fiscal 2024, Symbotic’s disclosure controls and procedures were effective to the best of their knowledge.
However, subsequent events (discussed below) reveal that Symbotic and the defendants wilfully misled investors about the accuracy of internal controls and financial statements.
Plaintiffs’ Arguments
The plaintiffs maintain that the Defendants deceived investors by lying and withholding critical information about the company’s business practices and prospects during the Class Period. Importantly, the Defendants are accused of misleading investors about the flawed financial reporting procedures that led to the ballooning of its revenues and income/loss during the time in question.
The information became clear on November 27, 2024, when Symbotic filed a notice with the SEC (Securities and Exchange Commission). The company revealed that it identified mistakes in its revenue recognition techniques related to cost overruns on specific deployments. Symbotic added that these items will not be billable, which in turn impacted the system revenues, income/loss before tax, net income/loss, and its gross margin. The error impacted the said items in the last three quarters of Fiscal 2024. Following the news, SYM shares plunged nearly 36% on the same day.
Furthermore, the management had identified material weaknesses in the financial reporting for the Fiscal year ending September 28, 2024. Accordingly, Symbotic informed that it was working on measures to improve its internal controls and financial reporting standards.
To conclude, the defendants allegedly misled investors about the company’s internal controls, which led to material weakness in the financial reporting in Fiscal 2024. Owing to these deficiencies, SYM shares lost nearly 33% in the past year, causing massive damage to shareholder returns.
