Pomerantz Law Firm Announces the Filing of a Class Action Against Rocket Companies, Inc. and Certain Officers - RKT

NEW YORK, July 13, 2021 /PRNewswire/ -- Pomerantz LLP announces that a class action lawsuit has been filed against Rocket Companies, Inc. ("Rocket" or the "Company") (NYSE: RKT) and certain of its officers. The class action, filed in the United States District Court for the Eastern District of Michigan, Southern Division, and docketed under 21-cv-11618, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Rocket Class A common stock between February 25, 2021 and May 5, 2021, both dates inclusive (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act") against Rocket and certain of the Company's senior officers.

If you are a shareholder who purchased or otherwise acquired Rocket Class A Common stock during the Class Period, you have until August 30, 2021 to ask the Court to appoint you as Lead Plaintiff for the class.  A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at newaction@pomlaw.com or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980.  Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased. 

[Click here for information about joining the class action]

Rocket is the largest mortgage originator in the U.S., with an estimated 9.2% market share as of March 31, 2020. The Company operates two primary segments: (i) the Direct-to-Consumer segment; and (ii) the Partner Network segment. In its Direct-to-Consumer segment, Rocket directly interacts with clients and potential clients using various performance marketing channels.  In its Partner Network segment, Rocket partners with third parties who utilize the Company's platform to provide their clients with mortgage solutions.

Rocket's mortgage origination business generates revenues primarily from the gain on sale of loans, which includes loan origination fees, revenues from sales of loans into the secondary market, as well as the fair value of originated mortgage serving rights and hedging gains and losses. One of the most important metrics in measuring Rocket's financial performance is the Company's gain on sale margin, which refers to the Company's net gain on sale of loans divided by the net rate lock volume for the period, excluding all reverse mortgage activity.  Net rate lock volume refers to the unpaid principal balance of loans issued by the Company subject to interest rate lock commitments, net of certain factors identified by the Company. The gain on sale margin is viewed by investors as a core measure of Rocket's profitability.

The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and compliance policies.  Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) 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; (ii) 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; (iii) the adverse trends identified above 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; (iv) 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 the Company's gain on sale margins had returned to levels not seen since the first quarter of 2019; (v) rather than remaining elevated due to surging demand, Rocket's Company-wide gain-on-sale margins had fallen materially below recent historical averages; and (vi) as a result of the foregoing, Defendants' positive statements about the Company's business operations and prospects were materially misleading and/or lacked a reasonable basis.

On May 5, 2021, 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 the Company's lowest quarterly gain on sale margin in two years.  The collapse in the Company's gain on sale margin reflected the fact that the favorable market conditions purportedly being experienced by the Company during the Class Period had in fact 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 gain on sale margin was being caused by three factors: (i) pressure on loan pricing; (ii) a product mix shift to Rocket's lower margin Partner Network segment; and (iii) a compression in price spreads between the primary and secondary mortgage markets.

On this news, Rocket's Class A common stock price fell $3.79 per share, or 16.62%, to close at $19.01 per share on May 6, 2021, on heavy volume of over 37 million shares traded.  As the market continued to digest the news in the days that followed, Rocket's Class A common stock price continued to decline, 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 acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 80 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomerantzlaw.com

CONTACT:

Robert S. Willoughby
Pomerantz LLP
rswilloughby@pomlaw.com
888-476-6529 ext. 7980

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SOURCE Pomerantz LLP