The law firm of Kessler Topaz Meltzer & Check, LLP reminds investors that a securities fraud class action lawsuit has been filed against Rocket Companies, Inc. (NYSE:RKT) (“Rocket”) on behalf of those who purchased or acquired Rocket Class A common stock between February 25, 2021 and May 5, 2021, inclusive (the “Class Period”).
Deadline Reminder: Investors who purchased or acquired Rocket Class A common stock during the Class Period may, no later than August 30, 2021, seek to be appointed as a lead plaintiff representative of the class. For additional information or to learn how to participate in this litigation please contact Kessler Topaz Meltzer & Check, LLP: James Maro, Esq. (484) 270-1453 or Adrienne Bell, Esq. (484) 270-1435; toll free at (844) 887-9500; via e-mail at [email protected]; or click https://www.ktmc.com/rocket-companies-class-action-lawsuit?utm_source=PR&utm_medium=link&utm_campaign=rocket
Rocket is an online mortgage lender that operates the Rocket Mortgage online platform, which allows clients to apply for and service mortgages through the Internet or by using Rocket’s proprietary mobile phone app. Ninety percent of Rocket’s revenues are derived from originating, closing, selling and servicing home mortgages. Rocket operates two primary segments: (1) the Direct-to-Consumer segment; and (2) the Partner Network segment. In its Partner Network, Rocket partners with third parties who utilize its platform to provide their clients with mortgage solutions. The Partner Network has lower operating margins because Rocket shares profits with its partners.
The Class Period commences on February 25, 2021, when Rocket issued a press release titled, in part, “Rocket Companies Experiences Explosive Growth,” which announced Rocket’s financial results for the fourth quarter and full year of 2020. Rocket reported, among other things, closed loan origination volume of $107.2 billion and gain on sale margin of 4.41% for the fourth quarter. Rocket emphasized that it had “[i]ncreased gain on sale margin by 100 basis points year-over-year” during the quarter and “[i]ncreased gain on sale margin by 127 basis points year-over-year to 4.46%” for the full-year period. Throughout the Class Period, Rocket continued to tout its business operations and downplayed the effects of competition on Rocket’s gain on sale margins.
The truth was revealed on May 5, 2021, when Rocket issued a press release announcing its first quarter results and second quarter outlook. Rocket reported that it was on track to achieve closed loan volume within a range of only $82.5 billion and $87.5 billion and gain on sale margins within a range of only 2.65% to 2.95% for the second quarter of 2021. At the mid-point, this gain on sale margin estimate equated to a 239 basis point decline year-over-year and a 94 basis point decline sequentially, which represented Rocket’s lowest quarterly gain on sale margin in two years. Following this news, the price of Rocket’s Class A common stock dropped from $22.80 per share when the market closed on May 5, 2021 to $19.01 per share when the market closed on May 6, 2021, a nearly 17% decline.
The complaint alleges that throughout the Class Period, the defendants made false and/or misleading statements and/or failed to disclose that: (1) Rocket’s gain on sale margins were contracting at the highest rate in two years as a result of increased competition among mortgage lenders, an unfavorable shift toward the lower margin Partner Network operating segment and compression in the price spread between the primary and secondary mortgage markets; (2) Rocket was engaged in a price war and battle for market share with its primary competitors in the wholesale market, which was further compressing margins in Rocket’s Partner Network operating segment; (3) the adverse trends were accelerating and, as a result, Rocket’s gain on sale margins were on track to plummet at least 140 basis points in the first six months of 2021; (4) as a result of the above, the favorable market conditions that had preceded the Class Period and allowed Rocket to achieve historically high gain on sale margins had vanished as Rocket’s gain on sale margins had returned to levels not seen since the first quarter of 2019; (5) rather than remaining elevated due to surging demand, Rocket’s gain on sale margins had fallen materially below recent historical averages; and (6) as a result of the foregoing, the defendants’ positive statements about Rocket’s business operations and prospects were materially misleading and/or lacked a reasonable basis.
Rocket investors may, no later than August 30, 2021, seek to be appointed as a lead plaintiff representative of the class through Kessler Topaz Meltzer & Check, LLP or other counsel, or may choose to do nothing and remain an absent class member. A lead plaintiff is a representative party who acts on behalf of all class members in directing the litigation. In order to be appointed as a lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not affected by the decision of whether or not to serve as a lead plaintiff.
Kessler Topaz Meltzer & Check, LLP prosecutes class actions in state and federal courts throughout the country involving securities fraud, breaches of fiduciary duties and other violations of state and federal law. Kessler Topaz Meltzer & Check, LLP is a driving force behind corporate governance reform, and has recovered billions of dollars on behalf of institutional and individual investors from the United States and around the world. The firm represents investors, consumers and whistleblowers (private citizens who report fraudulent practices against the government and share in the recovery of government dollars). The complaint in this action was not filed by Kessler Topaz Meltzer & Check, LLP. For more information about Kessler Topaz Meltzer & Check, LLP please visit www.ktmc.com.