Pomerantz Law Firm Takes Legal Action Against SoundHound AI Over Securities Violations

Legal Battle Unfolds: Pomerantz LLP Files Class Action Against SoundHound AI

In a noteworthy development for investors, Pomerantz LLP has filed a class action lawsuit against SoundHound AI, Inc. (NASDAQ: SOUN) and specific company officers. The lawsuit, initiated in the United States District Court for the Northern District of California, aims to protect the rights of shareholders who acquired SoundHound securities between May 10, 2024, and March 3, 2025, a period that highlights critical business operations and acquisitions of the company.

Context of the Lawsuit

The lawsuit alleges violations of federal securities laws, particularly under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alongside the well-known Rule 10b-5. Investors impacted by the alleged misconduct are encouraged to act swiftly, as they have until May 27, 2025, to apply for the role of Lead Plaintiff in the class action.

The complaint asserts that SoundHound, which specializes in voice AI technology, has faced significant material weaknesses in its internal control over financial reporting. Despite the company’s growth and strategic acquisitions, including SYNQ3 and Amelia Holdings, the lawsuit highlights allegations that these flaws have impaired the accuracy of financial statements related to these acquisitions.

Strategic Acquisitions Under Scrutiny

In the face of growth, SoundHound embarked on two strategic acquisitions within a year. In January 2024, the company acquired SYNQ3 for approximately $15.8 million, followed shortly by the acquisition of Amelia for $80 million in August 2024. These acquisitions were touted as crucial for securing SoundHound’s competitive position in the burgeoning field of voice and conversational AI. However, concerns have arisen about how these transactions were handled financially, prompting the current lawsuit.

Issues with Financial Reporting

Throughout the class period, the complaint alleges misleading statements made by SoundHound’s executives regarding the company’s business health and operational performance. Notably, it claims that internal control deficiencies impacted the company’s ability to accurately account for the acquisitions. This has raised concerns regarding inflated goodwill reported post-amalgamation and the financial implications that followed.

SoundHound’s management acknowledged the existing material weaknesses in July 2024, admitting to challenges in maintaining effective controls while adapting to rapid business expansion. This has culminated in worries over the accuracy of the company's financial reporting. In a disclosure made on March 4, 2025, SoundHound noted that it would be unable to file its Annual Report (2024 10-K) on time, attributing the delay to the complexities arising from the recent acquisitions.

Market Reaction

On the heels of this news, SoundHound’s stock experienced a notable decline, dropping by 5.86% on March 4, 2025, marking a critical moment for investors closely monitoring the company's activity. Additionally, the subsequent filing of the 2024 10-K revealed further ramifications, including adjustments to previously stated earnings and goodwill valuations following the acquisitions, raising questions about the company’s accounting integrity.

Moving Forward

For investors, this situation remains fluid as they navigate the developments stemming from the class action. Pomerantz LLP, known for its expertise in securities class litigation, represents many shareholders seeking to ensure accountability from SoundHound AI’s leadership. As the case progresses, it highlights the intricate balance that tech companies must maintain between growth initiatives and regulatory compliance. The outcome of this legal action could significantly impact not only SoundHound but also set precedents for similar cases in the tech industry.

For any investors seeking to discuss their potential involvement or needs related to this case, Pomerantz has encouraged communication through their official contact channels, ensuring that no party misses the opportunity to protect their investments in the wake of these allegations.