Hudson Labs uses specialized AI to identify red flags in securities filings that are predictive of stock price collapse.
Hudson Labs predicted a collapse at iLearningEngines ($AILE) since March 2022. At this time, our algorithms assigned a forensic risk score of 86. For context, only 10% of the US public companies score above 70. During this time, AILE’s stock price was about $10.
As of December 27, 2024, its stock price had plunged to under $1, a decrease of more than 90%. For context, the S&P 500 was up 40% during this same timeframe.
iLearningEngine short report
Hindenburg published a short report on iLearningEngine in August 2024, titled “An AI SPAC with artificial partners and artificial revenue”. Since then, AILE disclosed several negative events in several 8-K forms:
- November 26: withdrew all of its financial statements and reported a cybersecurity incident
- December 10: placed 5 executives on its senior leadership on administrative leave (and they all resigned on December 27)
- December 20: declared Chapter 11 bankruptcy
Red flags at AILE flagged by Hudson Labs
In addition to AILE’s high risk score, our models have flagged multiple red flags at the company.
Multiple internal control weaknesses and restatements
- In every year from 2021 to 2023, the company has identified material weaknesses in the accounting and reporting of complex financial instruments.
- In August 2024, it further identified a lack of sufficient personnel with adequate internal controls and accounting knowledge, non-compliance with certain provisions of a term loan (highly unusual), and untimely reporting and payment of payroll taxes.
- The company has restated its financial statements three times since 2021, two of which are accounting errors relating to inaccurate carrying value of Class A shares and incorrect adjustments to convertible promissory notes.
Non-timely filings
iLearingEngines delayed filings of its 10-Q four times since 2021, including most recently on November 18, 2024. Reasons for the delay include internal investigation, business combination, and restatements.
Operations and Strategy
It repeatedly reported concerns from 2022 to 2023 with bankruptcy risks and addressed them through multiple Extension Funds as the company issued additional promissory notes.
Hudson Labs’ AI tools process over 800,000 SEC filings each year, analyzing millions of pages and billions of words to uncover patterns and red flags that might otherwise go unnoticed. This early detection allowed Hudson Labs to warn clients about the potential risks in iLearningsEngine long before the broader market caught on.
In a world where the smallest oversight can have significant consequences, Hudson Labs provides the tools needed to navigate the complexities of modern finance. Embrace the future of equity research with Hudson Labs, and complement your strategies with advanced risk detection and analytics.
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