The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the Central District of California on behalf of those who acquired HyreCar Inc. (“HyreCar” or the “Company”) (NASDAQ: HYRE) securities from May 14, 2021 through August 10, 2021, inclusive (the “Class Period”). Investors have until October 26, 2021 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
HyreCar operates a web-based marketplace that allows car and fleet owners to rent their cars to Uber, Lyft, and other gig economy service drivers. HyreCar operates a platform that connects gig drivers with automobiles, while also providing insurance and tactical support. HyreCar earns revenues from two revenue share fees (one from the driver and one from the owner) as well as fees for driver insurance, with the insurance fee representing a large (if not majority) percentage of the revenue generated by each transaction.
On May 13, 2021, after the market had closed, HyreCar issued a press release which stated that the Company had achieved “Record First Quarter 2021 Financial Results” for the quarter ended March 31, 2021. The release stated that HyreCar’s insurance deposits had more than doubled during the quarter to $1.7 million, while the amount of HyreCar’s insurance reserve (which indicates the amount of claims incurred but not yet paid) had declined more than 17% since year end to $1.7 million.
The truth about HyreCar’s insurance revenue was revealed on August 10, 2021. After the market closed, HyreCar issued a press release announcing deeply disappointing results for the quarterly period ended June 30, 2021, including net losses of $9.3 million compared to losses of $3.8 million in the same period the prior year. Furthermore, HyreCar’s adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) loss for the second quarter of 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 the second quarter of 2021 was just $0.8 million (less than one third HyreCar’s gross profit in the second quarter of 2020), with a gross profit margin of just 24%. On this news, the Company’s share price declined by $9.27 per share, or approximately 48.5%, from $19.12 per share to close at $9.85 per share on August 11, 2021.
The lawsuit alleges throughout the Class Period, the Defendants failed to disclose the following adverse facts, which were known to Defendants or recklessly disregarded by them: (1) HyreCar had materially understated its insurance reserves; (2) HyreCar had systematically failed to pay valid insurance claims incurred prior to the Class Period; (3) HyreCar had incurred significant expenses transitioning to its new third-party insurance claims administrator and processing claims from prior periods; (4) HyreCar had failed to appropriately price risk in its insurance products and was experiencing elevated claims incidence as a result; (5) HyreCar 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 of the above, HyreCar’s operations and prospects were misrepresented because the company 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 HyreCar’s purported gross margin, EBITDA, and net loss trajectories.
If you purchased or otherwise acquired HyreCar securities, have information, or would like to learn more about these claims, please contact Thomas W. Elrod of Kirby McInerney LLP at 212-371-6600, by email at firstname.lastname@example.org, or by filling out this contact form, to discuss your rights or interests with respect to these matters without any cost to you.