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UPST Stock Slides on News of Securities Fraud Allegations

  • Upstart (NASDAQ:UPST) stock closed down 13% today following an onslaught of allegations
  • The company has been accused of securities and investor fraud, allegedly misleading investors about its artificial intelligence (AI) loan model
  • UPST stock has shed more than 80% of its value since October
In this photo illustration the Upstart (UPST) logo seen displayed on a smartphone screen
Source: rafapress / Shutterstock.com

Cloud-based AI lending platform Upstart is well in the red today on accusations of securities and investor fraud. UPST stock closed the day down by 13%.

This week, a number of legal firms filed fraud class action lawsuits against Upstart. They allege that Upstart misled investors about its AI model. Apparently, the model was unable to account for important macroeconomic factors, including rate hikes and the end of U.S. stimulus. According to the prosecuting parties, this allowed Upstart partners to gain higher approval rates on its credit requests.

Specifically, the lawsuit challenges Upstart’s claims that its AI algorithm “enables a superior load product” and “leverages the power of AI to more accurately quantify the risk of a loan.” The law firms staging these complaints have urged investors to submit their losses as evidence of wrongdoing.

UPST Stock Continues to Plummet Amid Legal Scandal

This week’s lawsuit news comes as seemingly the latest sell-sign for the struggling company. Earlier this month, Upstart announced surprisingly poor first-quarter financial results, including a lowered revenue outlook and substantially more loans on its balance sheet. During the earnings call, management also revealed it was using company capital as a “funding buffer for core personal loans in periods of interest rate fluctuation where the market clearing price is in flux.”

UPST stock crashed in response to the surprise earnings miss, dropping 56% in a day. This effectively wiped billions from the company’s market capitalization as analysts and investors everywhere quickly abandoned shares.

Down from an all-time high of $401.49, Upstart currently trades for about $45 per share. As the company faces continued legal action and analyst downgrades, UPST stock is quickly becoming another cautionary tale.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

With degrees in economics and journalism, Shrey Dua leverages his ample experience in media and reporting to contribute well-informed articles covering everything from financial regulation and the electric vehicle industry to the housing market and monetary policy. Shrey’s articles have featured in the likes of Morning Brew, Real Clear Markets, the Downline Podcast, and more.

Article printed from InvestorPlace Media, https://investorplace.com/2022/05/upst-stock-slides-on-news-of-securities-fraud-allegations/.

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