Innodata crashes 30% after Wolfe Research shorts the stock By

© Reuters. Innodata (INOD) crashes 30% after Wolfe Research shorts the stock

Wolfe Research announced on Thursday it is shorting Innodata, Inc. (INOD), criticizing the company for its overemphasis on being an AI pioneer for leading global companies.

Rather, the research firm sees it as “a deteriorating, manual data-entry business driven by offshore labor, not innovation.”

INOD stock crashed more than 30% on Thursday.

“INOD used to disclose its R&D spend in its quarterly earnings press releases, but INOD’s R&D spend apparently fell so low that after Q1 2021 the company stopped disclosing it entirely,” it wrote.

Innodata’s total investment in research and development (R&D) amounted to only $4.4 million over the past five years, with the company allocating even less to R&D in 2023 than what it spent on press releases promoting its “AI” technology, Wolfe said.

“INOD’s business has been slowly decaying over the last two decades as automatic data annotation has made its legacy business offshoring manual data annotation less relevant and consistently unprofitable. And INOD flat out does not have the money to pivot to AI or anything else.”

The research company claimed it has spoken with a past senior employee of Innodata, who allegedly described the company’s AI as “smoke and mirrors.”

Another ex-employee suggested the company’s portrayal of its AI was merely an attempt to embellish the reality, likening it to “putting lipstick on a pig,” Wolfe Research noted in the report.

“INOD does not look or operate like a technology company, much less an AI company, it doesnot even have a Chief Technology Officer,” it said.

“INOD claims its AI platform, Goldengate, powers most of what it’s doing, but our analysis indicates Goldengate is rudimentary software developed by just a handful of employees.”

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