March 19, 2021 - An investor in shares of Root, Inc. (NASDAQ: ROOT) filed a lawsuit in the U.S. District Court for the Southern District of Ohio over alleged violations of Federal Securities Laws by Root, Inc. in connection with certain allegedly false and misleading statements made between October 28, 2020 and March 8, 2021.
Columbus, OH based Root, Inc. provides insurance products and services in the United States. On or around October 27, 2020, Root, Inc. (NASDAQ: ROOT) conducted its initial public offering ("IPO"), selling 26.8 million shares of common stock priced at $27.00 per share.
Root, Inc. reported that its annual Total Revenue rose from $290.2 million in 2019 to $346.8 million in 2020, and that its Net Loss increased from $260.1 million in 2019 to $363 million in 2020.
On March 9, 2021, BofA Securities analyst Joshua Shanker initiated coverage of Root, Inc. (NASDAQ: ROOT) with an "Underperform" rating on the premise that the Company is unlikely to be cash flow positive until 2027, finding that Root, Inc. "will require not insignificant cash infusions from the capital markets to bridge its cash flow needs."
Shares of Root, Inc. (NASDAQ: ROOT) declined to as low as $10.88 per share on March 15, 2021.
According to the complaint the plaintiff alleges on behalf of purchasers of Root, Inc. (NASDAQ: ROOT) common shares between October 28, 2020 and March 8, 2021, that the defendants violated Federal Securities Laws. More specifically, the plaintiff claims that the Offering Documents the were filed in connection with the IPO and the Defendants made false and/or misleading statements and/or failed to disclose that Root, Inc. would foreseeably fail to generate positive cash flow for at least several years following the IPO, that accordingly, the Company would foreseeably require significant cash infusions to meet its cash flow needs, that notwithstanding the Defendants' touting of Root's purportedly unique, data-driven advantages, several of the Company's established industry peers in fact possessed significant competitive advantages over Root with respect to, inter alia, telematics data and data engagement, and that as a result, the Offering Documents and Defendants' public statements between October 28, 2020 and March 8, 2021were materially false and/or misleading and failed to state information required to be stated therein.