A suspected securities lawsuit was filed on Friday against autoinsurtech Root Inc. and its board members after the stock price dropped dramatically following an analyst's negative report.
Columbus, Ohio-based Root, raised $ 724.4 million by selling 26.8 million shares at $ 27 per share at the IPO in October 2020, according to the lawsuit Ilia Kolominsky v. Root Inc., et al. filed Friday in the U.S. District Court in Columbus.
The company operates a direct-to-consumer model that serves customers primarily through mobile applications as well as through its website, according to the lawsuit. Bank of America securities analyst Joshua Shanker issued a report on Root saying the company is unlikely to be "cash flow positive" until 2027 and will need significant cash infusions. a "significant advantage" over Root in the data that insurers use to price their car insurance.
Following the publication of the report, Roots' share price fell to $ 1
Root did not respond to a request for comment.