NEW YORK, Sept. 01, 2021 (GLOBE NEWSWIRE) -- Gainey McKenna & Egleston announces that a class action lawsuit has been filed against HyreCar Inc. (“HyreCar” or the “Company”) (NASDAQ: HYRE) in the United States District Court for the Central District of California on behalf of those who purchased or otherwise acquired HyreCar publicly traded securities between May 14, 2021 and August 10, 2021, inclusive (the “Class Period”).
The Complaint alleges that Defendants made false and misleading statements and failed to disclose that: (1) the Company had materially understated its insurance reserves; (2) the Company had systematically failed to pay valid insurance claims incurred prior to the Class Period; (3) the Company had incurred significant expenses transitioning to its new third-party insurance claims administrator and processing claims incurred from prior periods; (4) the Company had failed to appropriately price risk in its insurance products and was experiencing elevated claims incidence as a result; (5) the Company 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, the Company’s operations and prospects were misrepresented because it 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 the Company’s purported gross margin, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), and net loss trajectories.
On August 10, 2021, the Company announced deeply disappointing results for the quarterly period ended June 30, 2021 (“Q2 2021”), including net losses of $9.3 million compared to losses of $3.8 million in the same period the prior year. Furthermore, the Company’s adjusted EBITDA loss for Q2 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 Q2 2021 was just $0.8 million (less than one third of the Company’s gross profit in the second quarter of 2020), with a gross profit margin of just 24%. Contemporaneously with the release, the Company disclosed that it had incurred skyrocketing costs of revenue during the quarter primarily as a result of significantly higher insurance claims incidence – including claims before March 31, 2021 “in excess of the reserves.” During the Company’s earnings call, executives revealed that the Company had been forced to revamp its claims processes and procedures and improve its risk price adjustments for policies issued by the Company. And when asked whether the Company was actually on track to achieve 45% to 50% gross margins in the near term as previously represented, the Company’s CFO essentially withdrew this goal, calling it a “shoot for the sky” aim and stating that “shooting for margin upwards of 40%” was more realistic. On this news, the price of the Company stock fell nearly 50%, damaging investors.
Investors who purchased or otherwise acquired shares of HyreCar during the Class Period should contact the Firm prior to the October 26, 2021 lead plaintiff motion deadline. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. If you wish to discuss your rights or interests regarding this class action, please contact Thomas J. McKenna, Esq. or Gregory M. Egleston, Esq. of Gainey McKenna & Egleston at (212) 983-1300, or via e-mail at tjmckenna@gme-law.com or gegleston@gme-law.com.
Please visit our website at http://www.gme-law.com for more information about the firm.
