Miramar Firefighters’ Pension Fund. v. iRobot Corporation (IRBT)

Bernstein Litowitz Berger & Grossmann Announces the Filing of Investor Class Action Lawsuit Against iRobot Corporation (IRBT) for Defrauding Investors Through Illicit Channel-Stuffing Scheme

Court: United States District Court for the Southern District of New York
Case Number: 1:19-cv-09837
Judge: Hon. Jed S. Rakoff
Case Contacts: Michael D. Blatchley

On October 24, 2019, BLB&G filed a class action lawsuit against iRobot Corporation (“iRobot” or the “Company”) (NASDAQ: IRBT) and certain of the Company’s senior executives (collectively, “Defendants”) on behalf of investors in iRobot stock between November 21, 2016 and October 22, 2019 (the “Class Period”) for violations of federal securities laws.

If you have pertinent information concerning this matter or are a shareholder who has suffered a material loss on your iRobot investment, please contact BLB&G Partner Michael Blatchley at (212) 554-1281 or michaelb@blbglaw.com. The complaint filed by BLB&G is the first and only action filed on behalf of iRobot investors, and is based on an extensive proprietary investigation and a careful evaluation of the merits of this case.

A copy of the complaint is available by clicking here.

iRobot’s Alleged Fraud

Based in Bedford, Massachusetts, iRobot is a global consumer robot company that designs and builds robots to assist with household tasks. The Company’s most popular product line is the Roomba series of robotic vacuum cleaners.

Based on a proprietary investigation conducted by BLB&G, the complaint alleges that Defendants violated the federal securities laws by making a series of misrepresentations and material omissions concerning the demand for iRobot’s products. Specifically, throughout the Class Period, the Company reported explosive double-digit revenue growth which it attributed to increasing demand for its Roomba products, expanded gross margin due to distributor acquisitions, greater brand awareness, and technological innovation. In reality, iRobot engaged in questionable accounting practices and suspicious related-party transactions to mask slowing growth and other negative effects of increased competition.

BLB&G’s investigation has determined that iRobot engaged in illicit “channel stuffing”—a deceptive business practice used by a company to inflate its sales and earnings figures by deliberately sending more products to its distributors than they will be able to sell. To conceal its channel stuffing, in 2017, iRobot took the drastic step of purchasing its two major distributors in Europe and Asia. During the Class Period, the company also reported double digit revenue growth. The Company claimed the acquisitions were undertaken in order to market the Roomba product more effectively and increase margins. The true purpose of those acquisitions was to clean up inventory in the channel and continue to mask declining demand for iRobot’s products. As a result of these misrepresentations, iRobot shares traded at artificially inflated prices throughout the Class Period.

The truth began to be disclosed on April 23, 2019, when the Company announced quarterly revenues that were below analysts’ expectations and also revealed surging inventory levels. Then, on July 23, 2019, iRobot cut its full-year earnings forecast. Finally, on October 22, 2019, the Company cut the high end of its revenue forecast for the year and once again reported increased inventory levels. The true cause of the Company’s poor financial guidance is its inability to continue engaging in “channel stuffing” and other misconduct to conceal declining demand for its products. All told, these disclosures caused iRobot shares to decline precipitously, wiping out significant shareholder value.

If you wish to serve as Lead Plaintiff for the Class, you must file a motion with the Court no later than December 23, 2019, which is the first business day on which the U.S. District Court for the Southern District of New York is open that is 60 days after the date that this notice regarding the action was first published on October 24, 2019. Any member of the proposed Class may move the Court to serve as Lead Plaintiff through counsel of their choice. Members may also choose to do nothing and remain part of the proposed Class.

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Contact: Michael Blatchley at (212) 554-1281 or michaelb@blbglaw.com 

 

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