Pomerantz Law Firm Reminds Shareholders with Losses on their Investment in Rocket Companies, Inc. of Class Action Lawsuit and Upcoming Deadline – RKT
NEW YORK, NY / ACCESSWIRE / Aug 15, 2021 / Pomerantz LLP announces that a class action lawsuit has been filed against Rocket Companies, Inc. (“Rocket” or the “Company”) (NYSE: RKT) and some of its officers. The class action lawsuit, filed in the United States District Court for the Eastern District of Michigan, Southern Division, filed under 21-cv-11618, is on behalf of a group consisting of all natural and legal persons other than the defendants who bought or otherwise acquired Class A common stock of Rocket common stock between February 25, 2021 and May 5, 2021, both days inclusive (the “Collection Period”), to appeal under the Securities Exchange Act of 1934 (the “Exchange Act “) Against Rocket and certain of the company’s executives.
If you are a shareholder who purchased or otherwise acquired Class A common shares of Rocket during the Class Action Period, you have until August 30, 2021 to request the court to appoint you as the lead plaintiff for the class action. A copy of the complaint is available at www.pomerantzlaw.com. To discuss this promotion, contact Robert S. Willoughby at email@example.com or 888.476.6529 (or 888.4-POMLAW) toll free ext. 7980. Inquiries by email are encouraged to include their postal address, telephone number, and the number of shares purchased.
[Click here for information about joining the class action]
Rocket is the largest US mortgage lender with an estimated market share of 9.2% as of March 31, 2020. The company operates two main segments: (i) the direct-to-consumer segment; and (ii) the partner network segment. In its direct-to-consumer segment, Rocket interacts directly with customers and potential customers through various performance marketing channels. In its partner network segment, Rocket works with third parties who use the company’s platform to offer mortgage solutions to their customers.
Rocket’s mortgage business generates revenue primarily from profit from the sale of loans, including fees on lending, income from sales of loans in the secondary market, and the fair value of mortgage service rights issued and hedging gains and losses. One of the most important metrics in measuring Rocket’s financial performance is the company’s profit margin, which refers to the company’s net income from the sale of loans divided by the net fixed income for the period excluding any reverse mortgage activity. The net fixed interest volume refers to the unpaid capital balance of the loans issued by the company that are subject to a fixed interest rate, minus certain factors identified by the company. Income from the sale is viewed by investors as a key measure of Rocket’s profitability.
The story goes on
The lawsuit alleges that during the class action period, defendants made essentially false and misleading statements about the company’s business, operational, and compliance policies. In particular, Defendants made false and / or misleading statements and / or failed to disclose that: (i) Rocket’s profit on sales margins due to increased competition among mortgage lenders, an unfavorable shift towards the lower margin Partner Network operating segment, and consolidation of the Price range between the primary and secondary mortgage market; (ii) Rocket was involved in a price war and battle for market share with its major competitors in the wholesale market, which further depressed margins in the operating segment of Rocket’s partner network; (iii) the negative trends identified above accelerated and, as a result, Rocket’s profit margins were on track to decline by at least 140 basis points in the first six months of 2021; (iv) As a result of the foregoing, the favorable market conditions that preceded the class action period and allowed Rocket to generate historically high profit margins had disappeared as the company’s profit from sales margins returned to levels not seen since the first quarter was seen from 2019; (v) Rocket’s company-wide profit margins, rather than staying elevated due to increased demand, had fallen well below recent historical averages; and (vi) as a result of the foregoing, Defendants’ positive statements about the Company’s business and prospects have been materially misleading and / or unfounded.
On May 5, 2021, Rocket published a press release announcing its first quarter results and outlook for the second quarter. Rocket reported that it was on the right track for the second quarter of 2021, with a loan volume in a range of just 82.5 billion, that profit from the sales margin corresponded to a 239 basis points decrease compared to the previous year and a sequential decline of 94 basis points, which was the company’s lowest quarterly profit in sales margin in two years. The collapse in the company’s profit margin reflected the fact that the supposedly favorable market conditions the company experienced during the class action period had actually reversed. During a conference call to explain the results, Rocket’s Chief Financial Officer and Treasurer, Defendant Julie R. Booth, revealed that the sharp decline in quarterly earnings on sales margin was caused by three factors: (i) pressure on loan prices; (ii) a shift in the product mix to Rocket’s Lower Margin Partner Network segment; and (iii) a compression of the price spreads between the primary and secondary mortgage markets.
As a result of the news, Rocket’s Class A common stock fell $ 3.79 per share, or 16.62%, to close on the 6th. As the market continued to digest the news over the following days, the price of its Class A common stock fell of Rocket, falling to a low of just $ 16.48 per share by May 11, 2021.
The Pomerantz Firm, with offices in New York, Chicago, Los Angeles and Paris, is one of the leading law firms in the areas of corporate, securities and antitrust disputes. Founded by the late Abraham L. Pomerantz, known as the Dean of the Class Action Chamber, Pomerantz was a pioneer in the field of securities class actions. Today, more than 80 years later, the Pomerantz law firm continues the tradition he founded and fights for the rights of victims of securities fraud, breaches of duty of loyalty and corporate misconduct. The company has collected numerous millions of dollars in damages on behalf of class members. See www.pomerantzlaw.com.
SOURCE: Pomerantz LLP
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