Class Action Alleges Artificial Intelligence Co. C3.ai Misled Investors Prior to IPO

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A proposed class action alleges enterprise artificial intelligence provider C3.ai misled investors by failing to disclose in the run-up to its initial public offering (IPO) that a key business partnership was deteriorating and that the company faced challenges due to significant salesforce turnover. 

The 35-page suit alleges C3.ai and a number of executives and directors, including former Secretary of State Condoleezza Rice, filed with the Securities Exchange Commission prior to the company’s December 2020 IPO a “negligently prepared” registration statement that contained “materially false and misleading statements.” The case contends that the price of C3.ai’s shares was artificially inflated between its $610 million IPO and February 2022, when short-seller Spruce Point Capital Management issued a strong sell research opinion on the company. 

According to the lawsuit, the defendants failed to disclose to investors that C3.ai’s strategic partnership with Baker Hughes, an oil field services company, was “deteriorating,” and that C3.ai was employing a “flawed accounting methodology” to conceal the apparent breakdown. The case also alleges C3.ai did not warn investors that it faced challenges in the adoption of its software-as-a-service products and significant salesforce turnover. Moreover, the complaint claims C3.ai overstated to investors the extent of its investment in technology, its description of its customers, its total addressable market, the pace of its market growth and the scale of alliances with major business partners. 

Following the February 16, 2022 publication of a Spruce Point Capital Management report that largely highlighted the foregoing allegations and claimed, in part, that C3.ai “took advantage of the frothy environment for high growth, technology story stocks to raise capital in late December 2020,” the company’s stock price fell $1.01 per share, injuring investors financially, the lawsuit relays. 

The lawsuit looks to represent all persons and entities who purchased or otherwise acquired (a) C3.ai Class A common stock in the IPO or bought C3.ai Class A common stock thereafter in the stock market pursuant and/or traceable to the company’s offering documents linked to the IPO; and/or (b) C3.ai securities between December 9, 2020 and February 15, 2022 and were damaged thereby.

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