SHAREHOLDER ALERT: Kessler Topaz Meltzer & Check, LLP Announces Securities Fraud Class Action Lawsuit Filed Against HyreCar Inc.
Sep 20, 2021 1:07 PM ET
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The law firm of Kessler Topaz Meltzer & Check, LLP announces that a securities fraud class action lawsuit has been filed in the United States District Court for the Central District of California against HyreCar Inc. on behalf of those who purchased or acquired HyreCar securities betweeen May 14, 2021 and August 10, 2021, inclusive (the "Class Period").
HyreCar operates a web-based marketplace that allows car and fleet owners to rent their cars to Uber, Lyft and other gig economy service drivers. HyreCar operates a platform that connects gig drivers with automobiles, while also providing insurance and tactical support. HyreCar earns revenues from two revenue share fees (one from the driver and one from the owner) as well as fees for driver insurance, with the insurance fee representing a large (if not majority) percentage of the revenue generated by each transaction.
The Class Period commences on May 14, 2021. On May 13, 2021, after the market had closed, HyreCar issued a press release which stated that the company had achieved "Record First Quarter 2021 Financial Results" for the quarter ended March 31, 2021. The release stated that HyreCar's insurance deposits had more than doubled during the quarter to $1.7 million, while the amount of HyreCar's insurance reserve (which indicates the amount of claims incurred but not yet paid) had declined more than 17% since year end to $1.7 million.
The truth about HyreCar's insurance revenue was revealed on August 10, 2021. After the market closed, HyreCar issued a press release announcing deeply disappointing results for the quarterly period ended June 30, 2021, including net losses of $9.3 million compared to losses of $3.8 million in the same period the prior year. Furthermore, HyreCar's adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA") loss for the second quarter of 2021 was $7.1 million (four times higher than the $1.7 million adjusted EBITDA loss experienced in the second quarter of 2020) and its gross profit for the second quarter of 2021 was just $0.8 million (less than one third HyreCar's gross profit in the second quarter of 2020), with a gross profit margin of just 24%.
Following this news, the price of HyreCar stock fell nearly 50% in a single day to close at $9.85 per share on August 11, 2021.
The complaint alleges that throughout the Class Period, the defendants failed to disclose the following adverse facts, which were known to defendants or recklessly disregarded by them: (1) HyreCar had materially understated its insurance reserves; (2) HyreCar had systematically failed to pay valid insurance claims incurred prior to the Class Period; (3) HyreCar had incurred significant expenses transitioning to its new third-party insurance claims administrator and processing claims incurred from prior periods; (4) HyreCar had failed to appropriately price risk in its insurance products and was experiencing elevated claims incidence as a result; (5) HyreCar had been forced to dramatically reform its claims underwriting, policies and procedures in response to unacceptably high claims severity and customer complaints; and (6) as a result of the above, HyreCar's operations and prospects were misrepresented because the company was not on track to meet the financial estimates provided to investors during the Class Period, and such estimates lacked a reasonable basis in fact, including HyreCar's purported gross margin, EBITDA and net loss trajectories.
HyreCar investors may, no later than October 26, 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.
Kessler Topaz Meltzer & Check, LLP
James Maro, Jr., Esq.
280 King of Prussia Road
Radnor, PA 19087
(844) 887-9500 (toll free)
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