Bernstein litowitz berger & grossmann announces the filing of investor class action lawsuit against irobot corporation for defrauding investors through illicit channel-stuffing scheme

Bernstein litowitz berger & grossmann llp filed a class action lawsuit in the u.s. district court for the southern district of new york against irobot corporation 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. 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 of irobot’s alleged fraud has determined that the company 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.
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