According to the lawsuit, defendants made false and/or misleading statements and/or failed to disclose that:
- Kornit and its senior executives knew or, at a minimum, recklessly disregarded, that the Company’s digital printing business was beset by significant quality control problems and deficient customer service;
- e-commerce demand for Kornit products was slowing down as facets of the economy reopened following the COVID-19 pandemic, which was having a negative effect on Kornit’s revenue;
- one of Kornit’s largest customers, DTG2Go, a Delta Apparel, Inc. subsidiary, was transitioning to a competitor’s product offerings for its manufacturing needs;
- a second key customer, Fanatics, Inc., had decided to outsource production, a substantial portion of which was going to producers using non-Kornit systems;
- Kornit was more vulnerable to pressure from competitors than it had represented and lacked the competitive advantages it touted to investors;
- as a result, problems and deficiencies caused Kornit to lose market share to competitors, which led to a decline in the Company’s revenues, as Kornit’s dissatisfied customers sought out alternative options for their digital printing needs; and
- to the extent that the Company purported to warn of risks regarding quality and customer service issues as well as increased competition, Kornit failed to disclose that such risks had already materialized.
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