Robbins Geller Rudman & Dowd LLP announces that it has filed a class action lawsuit seeking to represent purchasers of Riskified Ltd. Class A ordinary shares in or traceable to Riskified’s July 2021 initial public offering (the “IPO”), charging Riskified, certain of its top executives and directors, as well as the IPO’s underwriters with violations of the Securities Act of 1933. The Riskified class action lawsuit was commenced on May 2, 2022 in the Southern District of New York and is captioned Thomas v. Riskified Ltd.
If you suffered significant losses and wish to serve as lead plaintiff of the Riskified class action lawsuit, please provide your information by clicking here. You can also contact attorney J.C. Sanchez of Robbins Geller by calling 800/449-4900 or via e-mail at firstname.lastname@example.org. Lead plaintiff motions for the Riskified class action lawsuit must be filed with the court no later than July 1, 2022.
CASE ALLEGATIONS: Riskified operates a risk management platform that utilizes machine learning to protect its merchant-clients from fraud. On July 1, 2021, Riskified filed with the U.S. Securities and Exchange Commission (“SEC”) a registration statement on Form F-1 for the IPO, which, after several amendments, was declared effective on July 28, 2021 (the “Registration Statement”). The Registration Statement was used to sell to the investing public 20.125 million Riskified Class A ordinary shares at $21 per share, generating over $422 million in gross proceeds.
The Riskified class action lawsuit alleges that the IPO’s Registration Statement made inaccurate statements of material fact because they failed to disclose the following adverse facts that existed at the time of the IPO: (i) as Riskified expanded its user base, the quality of Riskified’s machine learning platform had deteriorated (rather than improved as represented in the Registration Statement), because of, among other things, inaccuracies in the algorithms associated with onboarding new merchants and entering new geographies and industries; (ii) Riskified had expanded its customer base into industries with relatively high rates of fraud – including partnerships with cryptocurrency and remittance business – in which Riskified had limited experience and that this expansion has negatively impacted the effectiveness of Riskified’s machine learning platform; (iii) as a result, Riskified was suffering from materially higher chargebacks and cost of revenue and depressed gross profits and gross profit margins during its third fiscal quarter of 2021; and (iv) thus, the Registration Statement’s representations regarding Riskified’s historical financial and operational metrics and purported market opportunities did not accurately reflect the actual business, operations, and financial results and trajectory of Riskified prior to and at the time of the IPO, and were materially false and misleading, and lacked a factual basis.
On September 9, 2021, during a conference call to discuss Riskified’s financial results for the second quarter ended June 30, 2021, Riskified’s CFO, defendant Aglika Dotcheva, stated that Riskified tended “to experience higher chargebacks when we enter a new industry.”
Then, on November 16, 2021, Riskified announced its third quarter ended September 30, 2021 results, revealing that Riskified’s revenue growth had declined to 26% year-over-year, Riskified’s Gross Merchandise Value (“GMV”) growth had declined to 28% year-over-year, Riskified’s gross profits had increased only 10% year-over-year, Riskified’s gross profit margins had plummeted to just 46% during the quarter, and Riskified’s gross profit fell sequentially to $24.3 million. Further, Riskified’s cost of revenue had jumped to $28.3 million in the third quarter of 2021, primarily as a result of a sharp increase in chargeback expenses. During the earnings call, defendant Dotcheva blamed Riskified’s growing merchant base as a primary cause of increased chargebacks.
Finally, on February 23, 2022, Riskified announced its fourth quarter and year ended December 31, 2021 results, disclosing that Riskified’s revenue growth and GMV growth had continued to decelerate, Riskified’s gross profit growth remained muted, and Riskified’s cost of revenue had continued to climb. Riskified also revealed that it expected to generate only between $254 million and $257 million in 2022 revenues (which would represent only 11.5% year-over-year growth) and an adjusted 2022 earnings before interest, taxes, depreciation, and amortization of between negative $69 million and $66 million (which would more than triple the losses suffered by Riskified in 2021), indicating that the adverse business trends being suffered by Riskified were in fact accelerating. During the earnings call the same day, defendant Dotcheva stated that the year-over-year decline in gross profit margin experienced “was driven primarily by [Riskified’s] expansion into new industries and regions, increase of the tickets in travel industry as a percentage of total billings as well as the onboarding of new merchants.
At the time of the filing of the complaint, Riskified Class A shares traded below $6 per share, more than 70% below the IPO price.
THE LEAD PLAINTIFF PROCESS: The Private Securities Litigation Reform Act of 1995 permits any investor who purchased Riskified Class A ordinary shares in or traceable to Riskified’s IPO to seek appointment as lead plaintiff in the Riskified class action lawsuit. A lead plaintiff is generally the movant with the greatest financial interest in the relief sought by the putative class who is also typical and adequate of the putative class. A lead plaintiff acts on behalf of all other class members in directing the Riskified class action lawsuit. The lead plaintiff can select a law firm of its choice to litigate the Riskified class action lawsuit. An investor’s ability to share in any potential future recovery of the Riskified class action lawsuit is not dependent upon serving as lead plaintiff.
ABOUT ROBBINS GELLER RUDMAN & DOWD LLP: With 200 lawyers in 9 offices nationwide, Robbins Geller Rudman & Dowd LLP is the largest U.S. law firm representing investors in securities class actions. Robbins Geller attorneys have obtained many of the largest shareholder recoveries in history, including the largest securities class action recovery ever – $7.2 billion – in In re Enron Corp. Sec. Litig. The 2021 ISS Securities Class Action Services Top 50 Report ranked Robbins Geller first for recovering nearly $1.9 billion for investors last year, more than triple the amount recovered by any other securities plaintiffs’ firm. Please visit http://www.rgrdlaw.com for more information.
Robbins Geller Rudman & Dowd LLP
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J.C. Sanchez, 800-449-4900