Investor Alert: Faruqi & Faruqi Investigates Potential Claims against Applied Digital Corporation
If you purchased or acquired securities in Applied Digital stock or options between April 13, 2022, and July 26, 2023, you may have legal rights and may be eligible to participate in a federal securities class action. Leading national securities law firm, Faruqi & Faruqi, LLP, is investigating potential claims against Applied Digital Corporation (“Applied Digital” or the “Company”) (NASDAQ: APLD). The deadline to seek the role of lead plaintiff is October 11, 2023.
Who is Faruqi & Faruqi?
Faruqi & Faruqi, LLP is a leading minority and woman-owned national securities law firm with offices located in New York, Pennsylvania, California, and Georgia. With a team of experienced attorneys, Faruqi & Faruqi specializes in representing investors in securities class actions.
The Allegations
The complaint alleges that throughout the Class Period, Applied Digital made false and misleading statements regarding the Company’s business, operations, and compliance policies. It is further alleged that Applied Digital overstated the profitability of its datacenter hosting business and its ability to transition into a low-cost AI Cloud services provider. The company’s Board of Directors was also accused of not meeting the independence requirements of NASDAQ listing rules. These alleged actions resulted in Applied Digital misrepresenting its business model and failing to maintain proper corporate governance standards.
The Background
Applied Digital conducted its initial public offering (IPO) in April 2022, during which 8 million shares were issued for a total of approximately $40 million. The primary underwriter of the IPO was B. Riley Securities, an investment bank and subsidiary of B. Riley Financial, Inc. The offering documents for the IPO highlighted the close connections between Applied Digital and B. Riley, including the CEO’s sale of a majority interest to B. Riley Financial. Despite these connections, Applied Digital assured investors that its Board composition and corporate governance met the requirements of NASDAQ.
Further Issues Uncovered
On May 15, 2023, Applied Digital announced the launch of its AI cloud service. Subsequently, the company entered into a loan and security agreement with B. Riley Commercial Capital, LLC and B. Riley Securities. These transactions raised concerns among market analysts, who began to question Applied Digital’s business model and highlighted the close ties between the company and B. Riley. Short reports published by Wolfpack Research and The Bear Cave further criticized Applied Digital’s business practices, causing a significant decline in the stock price.
Concluding Events
On July 26, 2023, The Friendly Bear published a report claiming that B. Riley was exerting control over Applied Digital, to the detriment of shareholders. This report also called out conflicts of interest in the Company’s investigation into sexual harassment claims against its CEO. Following the publication of The Friendly Bear report, Applied Digital’s stock price experienced another decline.
Take Action
If you purchased or acquired securities in Applied Digital stock or options between April 13, 2022, and July 26, 2023, you may be eligible to participate in a federal securities class action. The deadline to seek the role of lead plaintiff is October 11, 2023. Contact Faruqi & Faruqi partner, Josh Wilson, directly at 877-247-4292 or 212-983-9330 (Ext. 1310). You can also visit www.faruqilaw.com/APLD for additional information at no cost or obligation to you.
Editor’s Notes
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