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Vroom, Inc. Class Action Lawsuit

Company Name
Vroom, Inc.
Stock Symbol
VRM
Class Period
June 9, 2020 to March 3, 2021
Motion Deadline
May 21, 2021
Court
Southern District of New York
39 days left to seek lead plaintiff status

Case Summary

Robbins Geller Rudman & Dowd LLP filed a class action lawsuit charging Vroom, Inc. (NASDAQ:VRM) and certain of its executives with violations of the Securities Exchange Act of 1934 and seeks to represent purchasers or acquirers of Vroom common stock between June 9, 2020 and March 3, 2021, inclusive (the “Class Period”).  The Vroom class action lawsuit was commenced on March 24, 2021 in the Southern District of New York and is captioned Holbrook v. Vroom, Inc., No. 21-cv-2551.

Vroom is an ecommerce platform that buys and sells used vehicles.  Through Vroom’s online platform, consumers can research and select from thousands of fully reconditioned vehicles.  After a vehicle is purchased, Vroom provides contact-free delivery to the buyer’s driveway.

The Vroom class action lawsuit alleges that, throughout the Class Period, defendants made false and/or misleading statements and/or failed to disclose that: (i) a lack of inventory had materially constrained Vroom’s ability to increase revenues in the second quarter of 2020 and meet a surge in customer demand for online used vehicles; (ii) Vroom had slashed the average selling price per vehicle by over 15% in response to a sustained and fundamental market shift to lower-priced vehicles, and not simply due to Vroom’s temporary inventory reduction activities taken earlier in the year; (iii) Vroom’s lack of adequate sales and support staff had resulted in degraded customer experiences and lost sales opportunities; (iv) as a result, Vroom needed to invest tens of millions of dollars in growing inventory and bolstering its sales and support and logistics networks, materially impairing Vroom’s short-term profitability; and (v) consequently, Vroom was generating materially lower profits per vehicle and poised to suffer accelerating losses and increased negative cash flows, despite a robust online used car market.

On August 12, 2020, Vroom revealed that Vroom had achieved only $253.1 million in revenues for the second quarter of 2020, a 3% year-over-year decline, largely as a result of a 17% decline in the average vehicle selling price per ecommerce unit.  Vroom’s release further stated that Vroom only expected to achieve an average total revenue per ecommerce unit of just $23,500 for the third quarter of 2020, which represented a 25% year-over-year average product price decline.  As a result of this lower average price, Vroom stated it achieved only $314 in average gross profit per ecommerce vehicle, a 75% year-over-year profit decline, and projected average gross profit per unit of only $1,600 to $1,700 for the third quarter of 2020.  During the earnings call to discuss these results, defendants essentially confirmed that the pricing pressures facing Vroom were not short term but reflected a fundamental market shift toward lower-priced vehicles.  On this news, the price of Vroom stock fell approximately 18%.

Then, on November 11, 2020, Vroom announced that Vroom expected to suffer sharply higher losses in the fourth quarter of 2020, with adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) losses projected to increase from $36 million in the third quarter of 2020 to $48 million at the midpoint, a 33% sequential increase.  During the accompanying earnings call, defendants revealed that Vroom was suffering from a “bottleneck” in its sales support and needed to invest heavily in building out Vroom’s sales support and logistics networks to avoid constrained growth, despite the favorable market environment.  On this news, the price of Vroom stock fell an additional 13%.

Finally, on March 3, 2021, Vroom issued a release announcing its fourth quarter and full year financial results, revealing operational issues and financial results far worse than previously disclosed to investors.  For the fourth quarter of 2020, Vroom suffered a net loss of $60.7 million, a 42% year-over-year increase.  This represented a $0.46 loss per share, which was outside the range provided by defendants and 20% worse than the midpoint.  Vroom also disclosed that Vroom suffered a $55.9 million adjusted EBITDA loss during the quarter, which was also outside the range provided by defendants and $8 million worse than the midpoint.  Vroom further revealed that Vroom had achieved only $1,821 total gross profit per unit, which was outside the range provided by defendants and 13% below the midpoint, and generated only $878 gross profit per vehicle, which represented a 13% decline year-over-year.  During the earnings call that day, Vroom revealed that Vroom was suffering from severe sales backlogs due to inadequate sales and support staff, which had materially impaired Vroom’s ability to sell existing inventory.  These backlogs, in addition to degrading the customer experience, had led to substantially lower gross profits per unit and caused the average days to sale per vehicle to increase 13% year-over-year to 77 days.  Defendants further revealed that Vroom’s sales deficiencies were so severe that the deficiencies would continue to constrain Vroom’s profits well into the first quarter of 2021.  On this news, the price of Vroom stock fell an additional 28%, further damaging investors.

The Private Securities Litigation Reform Act of 1995 permits any investor who purchased Vroom common stock during the Class Period to seek appointment as lead plaintiff in the Vroom class action lawsuit.  A lead plaintiff is generally the movant with the greatest financial interest in the relief sought by the putative class who is also typical and adequate of the putative class.  A lead plaintiff acts on behalf of all other class members in directing the Vroom class action lawsuit.  The lead plaintiff can select a law firm of its choice to litigate the Vroom class action lawsuit.  An investor’s ability to share in any potential future recovery of the Vroom action lawsuit is not dependent upon serving as lead plaintiff.  If you wish to serve as lead plaintiff of the Vroom class action lawsuit or have questions concerning your rights regarding the Vroom class action lawsuit, please provide your information here or contact counsel, Brian Cochran of Robbins Geller, at 800/449-4900 or 619/231-1058 or via e-mail at bcochran@rgrdlaw.com.  Lead plaintiff motions for the Vroom class action lawsuit must be filed with the court no later than May 21, 2021.

Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities class action litigation.  With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history.  For eight consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements.  Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims.  Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide.  Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry.

Press Release

ROBBINS GELLER RUDMAN & DOWD LLP FILES CLASS
ACTION SUIT AGAINST VROOM, INC.

New York – March 24, 2021 –  Robbins Geller Rudman & Dowd LLP (https://www.rgrdlaw.com/cases-vroom-inc-class-action-lawsuit.html) today announced that it filed a class action seeking to represent purchasers of Vroom, Inc. (NASDAQ:VRM) common stock during the period between June 9, 2020 and March 3, 2021, inclusive (the “Class Period”).  This action was filed in the Southern District of New York and is captioned Holbrook v. Vroom, Inc., No. 21-cv-2551.

The Private Securities Litigation Reform Act of 1995 permits any investor who purchased Vroom common stock during the Class Period to seek appointment as lead plaintiff in the Vroom class action lawsuit.  A lead plaintiff is generally the movant with the greatest financial interest in the relief sought by the putative class who is also typical and adequate of the putative class.  A lead plaintiff acts on behalf of all other class members in directing the Vroom class action lawsuit.  The lead plaintiff can select a law firm of its choice to litigate the Vroom class action lawsuit.  An investor’s ability to share in any potential future recovery of the Vroom class action lawsuit is not dependent upon serving as lead plaintiff.  If you wish to serve as lead plaintiff in the Vroom class action lawsuit, you must move the Court no later than 60 days from March 22, 2021.  If you wish to discuss the Vroom class action lawsuit or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, Brian E. Cochran of Robbins Geller, at 800/449-4900 or 619/231-1058 or via e-mail at bcochran@rgrdlaw.com.  You can view a copy of the complaint as filed at https://www.rgrdlaw.com/cases-vroom-inc-class-action-lawsuit.html.

The Vroom class action lawsuit charges Vroom and certain of its officers and directors with violations of the Securities Exchange Act of 1934.  Vroom operates an end-to-end ecommerce platform that sells fully reconditioned vehicles.

The complaint alleges that, during the Class Period, defendants made false and/or misleading statements and/or failed to disclose that: (i) Vroom was unable to sell a significant portion of existing inventory as a result of inadequate sales personnel and overreliance on third-party sales support; (ii) Vroom’s lack of adequate sales and support staff had resulted in severe growth constraints, degraded customer experience, lost sales opportunities and a greater than 10% increase in average days to sale for Vroom products; (iii) Vroom had been forced to mark down and liquidate existing inventory at fire sale prices; and (iv) as a result of the foregoing, defendants’ positive statements about Vroom’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.

On March 3, 2021, Vroom announced its fourth quarter and full year 2020 financial results.  Therein, Vroom reported that fourth quarter “Ecommerce Vehicle gross profit per unit decreased 13.1% to $878, driven primarily by lower sales margins, partially offset by improvements in inbound logistics and reconditioning costs per unit.”  Vroom also reported that for the fourth quarter, its “[n]et loss increased 41.9% to $60.7 million.”  During the accompanying earnings call, defendants revealed that Vroom was suffering from serious sales and support bottlenecks which had severely constrained the Company’s growth and profits per vehicle.  On this news, Vroom’s stock price fell 28%, damaging investors.

The plaintiff is represented by Robbins Geller, which has extensive experience in prosecuting investor class actions including actions involving financial fraud.

Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities litigation.  With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history.  For seven consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements.  Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims.  Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide.  Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry.  Please visit http://www.rgrdlaw.com for more information.

Contact:

            Robbins Geller Rudman & Dowd LLP
            Brian E. Cochran, 800-449-4900
            bcochran@rgrdlaw.com

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