Shares of recently public iLearningEngines AILE plummeted Thursday after a short report attacked the company's place in the artificial intelligence sector.
What Happened: Hindenburg Research, a firm headed by Nathan Anderson, published a report Thursday that shorts iLearningEngines, a newly public company that completed a SPAC merger to go public in April.
The company is an “artificial intelligence SPAC with artificial partners and artificial revenue," Hindenburg said.
The revenue and expenses that iLearningEngine reports are "largely fake," Hindenburg alleges.
"iLearningEngines was borderline insolvent when it merged with a desperate SPAC sponsor that was quickly running out of time to get a deal done. It had just $800,000 in cash and $22 million in debt prior to the merger."
The short report states that around 96% of the company's revenue and around 100% of the company's cost of goods sold run through an undisclosed related party.
The Securities and Exchange Commission asked the company about the unnamed "technology partner" previously and was told it was not a related party, the short report said.
The technology partner is Experion Technologies, Hindenburg said, citing its own research. Experion's American contact was previously listed as the CEO of iLearningEngines, which could make this a related party and, as Hindenburg alleges, a lie to the SEC.
Aside from the related party allegations, Hindenburg also states the company has no listed key customers or key partners, which makes its financial claims questionable.
"We believe the majority of iLearningEngines' revenue doesn't exist, and that its relationship with the mystery ‘technology partner' is merely a conduit for falsifying its financials. We do not expect it will remain a public company for long."
Company Responds: Bethesda, Maryland-based iLearning clapped back at Hindenburg’s allegations: "They are known for these types of attacks, and this one is clearly designed to secure a profit from a decline in ILE's stock price at the expense of ILE's investors.”
The response from iLearning Engines comes as Hindenburg stated it had taken a short position in iLearningEngines stock.
"We have reviewed the full report and believe it contains misleading statements, speculations and innuendos,” iLearningEngines said.
The company also noted that Hindenburg's report cannot guarantee the accuracy of the findings and the author could make "significant gains" if the stock price falls.
"We remain focused on executing our business plan and will not be distracted by typical short seller tactics."
AILE Price Action: Shares of iLearningEngines are down over 53% to $1.49 at last check Thursday.
Benzinga’s advertising business has a preexisting relationship with iLearningEngines.
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