Xiao-I Corporation Faces Class Action Lawsuit Over Alleged Securities Fraud

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On Thu, 17 Oct, 1:06 PM UTC

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Multiple law firms have filed class action lawsuits against Xiao-I Corporation, alleging securities fraud related to its IPO and subsequent financial disclosures. Investors claim the company misled them about its AI capabilities and financial health.

Class Action Lawsuit Filed Against Xiao-I Corporation

Multiple law firms have announced the filing of class action lawsuits against Xiao-I Corporation (NASDAQ: AIXI), a Shanghai-based artificial intelligence enterprise. The lawsuits allege that Xiao-I and certain of its officers violated federal securities laws by making false and misleading statements regarding the company's business, operations, and prospects 1234.

Allegations of Securities Fraud

The complaints claim that Xiao-I:

  1. Downplayed risks related to Chinese shareholders' non-compliance with Circular 37 Registration
  2. Failed to comply with Generally Accepted Accounting Principles (GAAP)
  3. Overstated efforts to remediate material weaknesses in financial controls
  4. Understated the impact of significant R&D expenses on business and financial results
  5. Exaggerated its AI capabilities and ability to compete in the AI market

These alleged misrepresentations are said to have occurred in connection with the company's March 2023 initial public offering (IPO) and throughout the period from March 9, 2023, to July 12, 2024 1234.

Financial Performance and Stock Price Decline

The lawsuits highlight several key financial events:

  • September 25, 2023: Xiao-I reported a net loss of $18.8 million for H1 2023, with a 355% increase in total operating expenses and a 708% rise in R&D expenses 34.
  • April 30, 2024: The company announced FY 2023 revenues of $59.2 million and a net loss of $27 million, with R&D expenses growing by 118.3% year-over-year 23.
  • July 15, 2024: Xiao-I received a notification from NASDAQ indicating non-compliance with the minimum bid price requirement 1234.

Following these announcements, Xiao-I's stock price experienced significant declines, with the ADS price falling to $0.67 per share on July 15, 2024 3.

Legal Proceedings and Investor Rights

The class action lawsuits seek to recover damages on behalf of investors who purchased Xiao-I securities during the specified period. Law firms such as Bronstein, Gewirtz & Grossman, LLC, Law Offices of Howard G. Smith, and Glancy Prongay & Murray LLP are urging affected investors to join the case 124.

Investors have until December 16, 2024, to file a motion to be appointed as lead plaintiff in the class action 1234. The lawsuits allege violations of the Securities Act of 1933 and the Securities Exchange Act of 1934.

Implications for AI Industry and Investors

This case highlights the growing scrutiny of AI companies and the importance of accurate financial reporting and disclosure in the rapidly evolving AI sector. It also underscores the challenges faced by international companies in complying with both domestic and U.S. securities regulations.

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