Litigation Update - Knightscope Authorized to Serve Notice of Action Against Capybara Research by Public Disclosure and Press Release Pursuant to Court Order
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Insights
The legal proceedings initiated by Knightscope, Inc. against Capybara Research and others for alleged defamatory short seller reports have significant implications for the involved parties and the broader market. The core of the matter lies in the assertion that Capybara's publications, which admittedly contain short positions against Knightscope's stock, are not mere market commentary but are fraudulent and designed to manipulate stock prices for financial gain.
From a legal standpoint, the case touches upon the intersection of free speech, securities law and defamation. The outcome could set a precedent regarding the extent to which short sellers can express negative sentiments about a company without crossing into illegal market manipulation or defamation. A ruling in favor of Knightscope could lead to increased scrutiny of short sellers and potentially curb aggressive tactics that can affect market dynamics.
Stakeholders should monitor this case closely, as it may influence the regulatory environment and investor sentiment. The market often reacts to perceived risks associated with legal disputes, especially when they involve allegations of market manipulation.
A critical aspect of the lawsuit is its potential impact on Knightscope's stock price and investor confidence. If Knightscope's allegations are proven, it could lead to a rebound in the company's stock price as the market corrects for the artificial deflation caused by the reports. Conversely, if the lawsuit is perceived as a distraction or a sign of vulnerability, it could further erode shareholder value.
Financially speaking, the costs associated with litigation can be substantial and may divert resources from core business activities. Investors often assess the financial health and risk profile of a company by factoring in legal challenges and their possible outcomes. The ability of Knightscope to effectively manage this lawsuit while maintaining its operational performance will be a key factor in its valuation by the market.
The broader implications for the market include the integrity of research reports and the role they play in investment decisions. The lawsuit raises questions about the due diligence investors must perform when considering such reports. Market sentiment can be significantly influenced by the perceived credibility of research firms and a ruling against Capybara Research could lead to more stringent standards for publishing investment-related opinions.
Long-term, the industry could witness a shift in how research is conducted and disseminated, with possibly more rigorous checks and balances to prevent the dissemination of misleading information. This could ultimately benefit the market by fostering a more transparent and trustworthy investment landscape.
Litigation Update - Knightscope Authorized to Serve Notice of Action Against Capybara Research by Public Disclosure and Press Release Pursuant to Court Order (Graphic: Business Wire)
The Action alleges that the Capybara Defendants take short positions in publicly traded companies and release fraudulent, disparaging reports in order to drive the company’s stock price down for their own financial benefit. In July and August of 2023, the Capybara Defendants posted to X (f/k/a Twitter) links to two alleged defamatory “short reports” (hereinafter, the “Capybara Reports”) on Capybara Research’s website disparaging the Company for the purpose of driving down the Company’s share price. Indeed, Capybara Research admits in the Capybara Reports that it “hold[s] a short position in shares of $KSCP....” As alleged in the Action, the Company believes that the Capybara Reports are a direct cause of the subsequent drop in market price of KSCP stock.
On January 25, 2024, the Company, through its counsel at The Basile Law Firm P.C., filed an ex parte motion for alternative service pursuant to Fed. R. Civ. P. 4(f)(3). On January 29, 2024, The Honorable Denise L. Cote granted the Company’s motion, in part, authorizing the Company to serve defendant Capybara Research notice of the Action through this press release and Form 8-K filed on the Securities and Exchange Commission’s EDGAR database.
Pursuant to the Order of The Honorable Denise L. Cote in the United States District Court for the Southern District of
About Knightscope
Knightscope builds cutting-edge technologies to improve public safety, and our long-term ambition is to make
Forward-Looking Statements
This press release may contain “forward-looking statements” about Knightscope’s future expectations, plans, outlook, projections and prospects. Such forward-looking statements can be identified by the use of words such as “should,” “may,” “intends,” “anticipates,” “believes,” “estimates,” “projects,” “forecasts,” “expects,” “plans,” “proposes” and similar expressions. Forward-looking statements contained in this press release and other communications include, but are not limited to, statements about the Company’s goals, profitability, growth, prospects, and the Company’s intention to litigate the allegations in the Action, including that the Capybara Defendants have made fraudulent, disparaging reports in order to drive the Company’s stock price down for their own financial benefit, and the ultimate outcome of such litigation. Although Knightscope believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks, uncertainties and other important factors that could cause actual results to differ materially from such forward-looking statements. These risks and uncertainties include, among other things, the Company’s ability to successfully litigate its allegations. Readers are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the heading “Risk Factors” in Knightscope’s Annual Report on Form 10-K for the year ended December 31, 2022. Forward-looking statements speak only as of the date of the document in which they are contained, and Knightscope does not undertake any duty to update any forward-looking statements, except as may be required by law.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240229740998/en/
Public Relations:
Stacy Stephens
Knightscope, Inc.
(650) 924-1025
Source: Knightscope, Inc.
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