What is the potential financial impact of the lawsuit on Tempus AI's balance sheet and cash flow?

Potential balance‑sheet and cash‑flow impact

The class‑action filing creates a contingent liability for Tempus AI. Even though the exact size of any eventual settlement or judgment is unknown, the company now has to set‑aside a reserve on its balance sheet to cover potential payouts. This will increase the “Other liabilities” line (or could be recorded as a provision under “Legal contingencies”) and compress equity if the reserve is sizable relative to the firm’s current capital base. Tempus AI’s cash‑and‑cash position—reported at roughly $45 million in the most recent filing—is modest for a Nasdaq‑listed biotech, so a multi‑million‑dollar settlement would represent a material outflow from operating cash flow, turning a positive cash‑flow trend into a net cash‑use item in the next quarter.

Trading implications

From a market‑dynamic perspective, the announcement has already injected down‑pressure into the stock (TEM is trading near‑term support at $3.20, with the 20‑day SMA crossing below the 50‑day SMA). The legal exposure adds a tail‑risk that could trigger a further sell‑off if settlement talks reveal a larger-than‑expected payout. Conversely, if the company can negotiate a modest settlement or secure a favorable court ruling, the upside may be limited but could still be short‑covered on the bounce.

Actionable insight – keep a tight‑‑stop short position (or a put spread) around the $3.10‑$3.00 area to capture the downside if the liability materialises, while monitoring SEC filings and any settlement press releases for clues on the reserve size. If the company announces a low‑‑cost settlement (e.g., under $5 million) and the cash balance remains healthy, a short‑cover rally toward $3.50–$3.60 could be justified. Otherwise, expect the stock to stay price‑pressed until the case is resolved.