Kessler Topaz Meltzer & Check, LLP Announces A Securities Fraud Class Action Filed Against Rocket Companies, Inc. – RKT

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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”), the Kessler Topaz Meltzer & Check, LLP law firm has filed a safeties fraud class act lawsuit in the United States District Court for the Eastern District of Michigan against Rocket Companies, Inc. (NYSE: RKT).

Rocket is a mortgage lender that operates the Rocket Mortgage online platform, which allows customers to apply for and service mortgages over the Internet via Rocket’s proprietary mobile phone app. The origination, closing, selling, and servicing of residential mortgages account for 90% of Rocket’s revenue.

Rocket operates two main sections:

(1) The Direct-to-Consumer section; and

(2) The Partner Network section. Rocket’s Partner Network is made up of third parties who use its platform to deliver mortgage solutions to their clients.

Because Rocket shares profits with its partners, the Partner Network has lower operating margins.

The Class Period begins on February 25, 2021, when Rocket released its financial results for the fourth quarter and full year of 2020 in a press release titled, in part, “Rocket Companies Experiences Explosive Growth.” For the fourth quarter, Rocket reported a closed loan origination volume of $107.2 billion and a gain on sale margin of 4.41 percent, among other things. Rocket said it “raised gain on sale margin by 100 basis points year-over-year” in the quarter and “improved gain on sale margin by 127 basis points year-over-year to 4.46 percent” for the entire year. Throughout the Class Period, Rocket emphasized its business operations while downplaying the impact of competition on Rocket’s profit margins.

The truth was exposed on May 5, 2021

It’s when Rocket announced their first-quarter results and second-quarter forecast in a press release. Rocket said it was on target to close $82.5 billion to $87.5 billion in loans in the second quarter of 2021, with gain on sale margins ranging from 2.65 percent to 2.95 percent. This gain on sale margin projection, at the midpoint, equal to a 239 basis point year-over-year fall and a 94 basis point sequential decline, representing Rocket’s lowest quarterly gain on sale margin in two years. Following this news, the price of Rocket’s Class A common stock fell roughly 17 percent, 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.

The complaint claims that the defendants made false and/or deceptive statements and/or omitted to reveal that during the Class Period:

(1) As a result of amplified competition amongst mortgage lenders, an unfavorable shift to the lower fringe Partner Network operating section, and density in the value spread between the primary and secondary mortgage markets, Rocket’s gain on sale margins happened to be constricting at the fastest rate in next two years;

(2) In the wholesale market, Rocket was in a pricing war and a battle for market dominance with its main competitors, which was additional compressing margins in Rocket’s Partner Network operating section;

(3) The negative trends were intensifying, and Rocket’s gain on sale margins was expected to drop by at least 140 basis points in the first half of 2021;

(4) As a result of the above, the favorable market circumstances that had existed before the Class Period and permitted Rocket to accomplish historically high gain on sale margins used to be disappeared, with Rocket’s gain on sale margins returning to levels not seen since the first quarter of 2019;

(5) Rocket’s gain on sale margins has fallen considerably below recent historical averages, rather than maintaining elevated owing to surging demand.

(6) The defendants’ optimistic representations about Rocket’s business operations and prospects were materially deceptive and/or lacked a reasonable foundation as a result of the foregoing.

Rocket investors may seek an appointment as a lead plaintiff spokesperson of the class by Kessler Topaz Meltzer & Check, LLP or further counsel no later than August 30, 2021, or they might choose to do nothing and be an absent class member. A lead plaintiff is a representative party who directs the case on behalf of all class members. For a class member to be designated as a lead plaintiff, the Court must establish that the class member’s claim is representative of other class members’ claims and that the class member will appropriately represent the class. The decision of whether or not to act as a lead plaintiff has no bearing on your ability to share in any recovery. Class actions involving securities fraud, breaches of fiduciary obligations, and other desecrations of federal and state law happen to be prosecuted by Kessler Topaz Meltzer & Check, LLP in federal and state courts crossways the country. Kessler Topaz Meltzer & Check, LLP happens to be a trailblazer in corporate governance reform, having recuperated billions of dollars for institutional and individual investors in the US and around the world. Investors, customers, and whistleblowers are all represented by the business (private citizens who report fraudulent practices against the government and share in the regaining of government bucks). Kessler Topaz Meltzer & Check, LLP did not submit the lawsuit in this case.

Source : www.finance.yahoo.com

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