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Applied Digital Corporation

Lead Plaintiff Deadline 10/11/2023
The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the Northern District of Texas on behalf of those who acquired Applied Digital Corporation (“Applied Digital” or the “Company”) (NASDAQ: APLD) securities during the period from April 13, 2022 through July 26, 2023, inclusive (the “Class Period”). Investors have until October 11, 2023 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
On June 23, 2023, Applied Digital filed a current report on Form 8-K with the U.S. Securities and Exchange Commission, which stated, in relevant part that the Company’s Audit Committee “has conducted an internal investigation into a threat, but not a formal assertion, of a sexual harassment claim by Regina Ingel, its Chief Marketing Officer, based on a personal relationship between Ms. Ingel and Wes Cummins,” Applied Digital’s Chief Executive Officer (“CEO”). Applied Digital’s Audit Committee determined that the relationship between the parties was consensual and the “allegations of workplace harassment are unfounded.” On this news, the price of Applied Digital shares declined by $1.58 per share, or approximately 16.34%, from $9.67 per share to close at $8.09 on June 23, 2023.
On July 6, 2023, analysts Wolfpack Research and The Bear Cave published reports questioning the viability of Applied Digital’s business model, stating that the Company “pumped up its stock in May by claiming to pivot from a floundering business hosting bitcoin miners, to becoming a low-cost AI Cloud service provider,” and “[t]he explosion of interest in AI after the emergence of Chat GPT has predictably attracted the worst promoters []to peddle fake AI wares to credulous investors, and our analysis indicates that APLD is one of these grifters because it is not an AI company[.]” Additionally, the Wolfpack Research report stated, in relevant part that Applied Digital’s Board of Director’s “incompetence was only highlighted when the CEO was caught in an embarrassing sex scandal, where the board appears to not have hired outside counsel to investigate, but used its Audit Committee instead.” Following publication of these reports, the price of Applied Digital shares declined by $1.27 per share, or approximately 14.16%, from $8.97 per share to close at $7.70 on July 6, 2023.
Finally, on July 26, 2023, The Friendly Bear published a report on Applied Digital, expressing the view that B. Riley “is controlling managerial decisions at Applied Digital to the detriment of Applied Digital shareholders”; that Applied Digital's board does not “meet[] the independence requirements under Nasdaq rules and . . . is essentially controlled by B. Riley.” The Friendly Bear report also alleged that clear conflicts of interest undermined the Company’s purported investigation into sexual harassment claims made against Applied Digital’s CEO, Wes Cummins, noting that the manner in which the claims were summarily dismissed by Applied Digital’s Audit Committee could subject Applied Digital to “significant legal blowback.” Following publication of the Friendly Bear Report, the price of Applied Digital shares declined by $0.60 per share, or approximately 6%, from $10.00 per share on July 26, 2023, to close at $9.40 on July 28, 2023.

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