Innodata Inc. Litigation Report

Case Introduction

D’Agostino v. Innodata Inc., et al 2:24-cv-00971

On February 21, 2024, investors sued Innodata Inc. (“Innodata” or the “Company”) in United States District Court for the District of New Jersey.

Plaintiffs in the federal securities class action allege that they acquired Innodata stock at artificially inflated prices between May 9, 2019 and  February 14, 2024 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time. To learn whether you may be eligible for a recovery under this class action, go to: https://zlk.com/pslra-1/innodata-lawsuit-submission-form?wire=31

Summary of the Allegations

Company Background

Innodata (NASDAQ:INOD) is a self-described global data engineering company.

As such, the Company claims it delivers  “the promise of A”I to many of the world's  top companies. Specifically, Innodata says it provide AI-enabled software platforms and managed services for AI data annotation, AI digital transformation, and industry-specific business processes. The Company also says its product offerings feature its  “low-code Innodata AI technology platform.”

The Company’s claims about its AI technology are at the crux of the current complaint.

Summary of Facts

Innodata and three of its current and/or former senior officers (the “Individual Defendants”) are now accused of deceiving investors by lying and withholding important information about the Company’s business during the Class Period.

In particular, they are accused of omitting truthful information about Innodata’s AI technology and ancillary issues from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused Innodata stock to trade at artificially inflated prices during the time in question.

The truth came out in a report published by Wolfpack Research on February 15, 2024.

Among other things, the “Wolfpack Report” alleged that Innodata’s AI is really “smoke and mirrors” and that the Company’s marketing claims are like “putting lipstick on a pig.” It further alleged that “other companies were only hiring Innodata for cheap labor and its operations were powered by thousands of low-wage offshore workers, not proprietary AI technology.” Lastly, the Wolfpack Report alleged  that Innodata’s “total investment in R&D over the past five years was only $4.4 million, with even less allocated to R&D in 2023 than what was spent on promoting its “AI” technology through press releases.”

A closer look…

As alleged, the Company and/or Individual Defendants repeatedly made false and misleading public statements throughout the Class Period.

During an earnings call held at the beginning of the Class Period, for instance, the Company’s CEO (an Individual Defendant) stated in pertinent part: “… we now believe we can turn our AI focus externally, building these tested technologies into market-facing services and product offerings, designed around helping enterprises integrate AI into events, document and content transformation, which in turn are expected to increase revenues and drive growth for us.”

Then, during a March 12, 2020 conference call, Innodata’s CEO stated in pertinent part: “We’re working with the leading information providers, applying AI to continent operations on their behalf. And we’re receiving very good market recognition in those markets for having done that.”

In another conference call held on May 14, 2020, the Company’s CEO stated in relevant part: “Last year, as you recall, we pivoted the company from a publishing services provider to a data engineering company, rolling out new products and solutions to help companies in wider markets, prepare data for AI and put AI to work in their businesses.”

Finally, in an annual report filed with the SEC on March 12, 2021, the Company stated in relevant part: “Our proprietary, state-of-the-art Goldengate platform is our core AI technology stack. It serves up no-code AI with transfer learning built on generative language models we have developed over the past five years of deploying industrial deep neural networks. Goldengate serves as the foundational technology for the AI projects we perform for customers, as well as the AI-under the-hood that powers our data annotation platform and our industry platforms.”

Actions You May Take

If you have purchased the Company’s stock during the Class Period, you may join the class action as a lead plaintiff, remain a passive class member, or opt out of this litigation and pursue individual claims that may not be available to the class as a whole. To learn more about your options, go to: https://zlk.com/pslra-1/innodata-lawsuit-submission-form?wire=31

NOTE: The deadline to file for lead plaintiff in this class action is April 22, 2024. You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court.