C3.ai operates as an enterprise artificial intelligence (AI) software company. The Company offers a variety of software-as-a-service applications for enterprises and software solutions and integrated turnkey enterprise AI applications for oil and gas, chemicals, utilities, manufacturing, financial services, defense, intelligence, aerospace, healthcare, and telecommunications market segments. The Company also purports to have strategic partnerships with Baker Hughes related to oil and gas markets; FIS related to financial services markets; Raytheon; and AWS, Intel, and Microsoft. The complaint alleges that the Offering Documents were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules and regulations governing their preparation. Additionally, throughout the Class Period, Defendants made materially false and misleading statements regarding the Companys business, operations, and compliance policies. Specifically, the Offering Documents and Defendants made false and/or misleading statements and/or failed to disclose that: (i) C3.ais partnership with Baker Hughes was deteriorating; (ii) C3.ais was employing a flawed accounting methodology to conceal the deterioration of its Baker Hughes partnership; (iii) C3.ai faced challenges in product adoption and significant salesforce turnover; (iv) the Company overstated, inter alia, the extent of its investment in technology, description of its customers, its total addressable market, the pace of its market growth, and the scale of alliances with its major business partners; and (v) as a result, the Companys public statements were materially false and misleading at all relevant times. On February 16, 2022, during pre-market hours, Spruce Point Capital Management (Spruce Point) issued a report and strong sell research opinion regarding C3.ai (the Spruce Point Report). Specifically, Spruce Point alleged that it had uncovered, inter alia, [e]vidence of a severely challenged partnership with Baker Hughes, a related-party and C3.ais largest customer; [s]igns of problematic financial reporting and accounting regarding the Baker Hughes joint venture and a revolving door in C3.ais Chief Financial Officer position; that [c]hallenges in product adoption and significant salesforce turnover make it unlikely that C3.ai will meet aggressive analyst estimates; [e]vidence of exaggerated or irreconcilable claims made by C3.ai[,] including numerous discrepancies regarding the value of and cumulative investment made by C3.ai in its technology, description of its customers, its total addressable market, the pace of its market growth and the scale of alliances with companies such as Microsoft, Hewlett Packard Enterprises, Google Cloud, Intel and Amazon Web Services; and [w]orrisome corporate governance practices and insider enrichment. As a result, Spruce Point conservatively estimate[d] 40% – 50% downside risk to C3.ais share price. Following publication of the Spruce Point Report, C3.ais stock price fell $1.01 per share, or 3.93%, to close at $24.70 per share on February 16, 2022. As of the time this Complaint was filed, the price of C3.ai Class A common stock continues to trade below the $42.00 per share Offering price, damaging investors.
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