Hindenburg Research Unveils Scathing Report on iLearningEngines: "An Artificial Intelligence SPAC with Artificial Partners and Artificial Revenue"

August 29, 2024

In a new and highly critical report, Hindenburg Research has cast a spotlight on iLearningEngines (NASDAQ: AILE), a self-described “AI-powered learning automation” company that went public via a SPAC (Special Purpose Acquisition Company) deal in April 2024. The report, titled "An Artificial Intelligence SPAC with Artificial Partners and Artificial Revenue," accuses iLearningEngines of inflating its financials and misleading investors about its business operations.

Key Allegations:

Hindenburg's report alleges that nearly all of iLearningEngines' revenue and expenses in 2022 were channeled through an undisclosed related party—an entity the company refers to as a "Technology Partner." Hindenburg claims to have unmasked this "Technology Partner" as Experion Technologies, a UAE-based firm that it believes is an undisclosed related party. This revelation came to light after an analysis of documents associated with a debt transaction. The report further alleges that iLearningEngines falsely claimed to the U.S. Securities and Exchange Commission (SEC) in November 2023 that Experion was not a related party.

According to Hindenburg's findings, the connections between iLearningEngines and Experion Technologies run deep. The report highlights that Experion's American contact, as listed in a 2020 web capture, was none other than iLearningEngines' CEO. Additionally, a 2022 web capture listed the American address for Experion as the personal residence of the same CEO. Furthermore, current iLearningEngines senior employees are listed as directors and shareholders of Experion's Indian affiliate, and UAE corporate records from June 2024 show that Experion is partially owned by the brother of iLearningEngines’ senior director of channel partnerships. Earlier UAE corporate records from 2019 indicate Experion was led by iLearningEngines' President and Chief Business Officer, along with its Assistant Vice President of Business Development.

Discrepancies in Financial Reporting:

Hindenburg also raised serious doubts about iLearningEngines' financial claims. Despite the company’s assertions of significant and growing revenue, Hindenburg points to a lack of industry presence and a failure to name key customers or partners. For example, iLearningEngines claims to have an annual revenue run rate of $216 million in the Indian market. However, the financials for its sole Indian subsidiary reported only approximately $853,471 in revenue for its latest fiscal year—99.4% less than the company's stated revenue.

Auditing Concerns:

The report also scrutinizes iLearningEngines' auditor, Marcum LLP, which was fined $3 million by the Public Company Accounting Oversight Board (PCAOB) in June 2023 for significant audit quality control issues. The SEC separately charged Marcum LLP in 2023 for widespread audit deficiencies related to SPAC audits, imposing a $10 million fine. Hindenburg argues that Marcum has once again failed to uphold basic auditing standards in its oversight of iLearningEngines.

Hindenburg Research concludes that the majority of iLearningEngines' revenue does not exist and that its relationship with Experion Technologies is merely a vehicle for falsifying its financials. The report ominously predicts that iLearningEngines will not remain a public company for long, given the extent of its alleged misconduct.

The fallout from this report could be significant, as investors and regulators scrutinize the company’s operations and financial disclosures more closely. As of now, iLearningEngines has not responded to Hindenburg’s allegations.